NZD/USD traded near 0.5915 on Friday, up 0.10% on the day and close to recent highs around 0.5930. The US Dollar Index was near 97.90, down 0.23%, which helped keep the pair supported.
Middle East tensions continued to affect markets after an Iranian official warned of retaliation if the US attacks again. Reports that Iran sent a new proposal to the US via mediators reduced immediate fear and weighed on the US Dollar.
US economic data were mixed. First-quarter GDP rose at an annualised 2%, below the 2.3% forecast, while ISM Manufacturing PMI stayed at 52.7 in April, slightly under estimates but still indicating expansion.
The Federal Reserve left rates unchanged at 3.5%–3.75% earlier this week. It also said inflation remains elevated, partly due to higher energy prices, and noted differing views on the committee and the chance of further hikes if inflation rises.
The current situation suggests a cautious bullish stance on the NZD/USD pair for the coming weeks. Weaker-than-expected US Gross Domestic Product is weighing on the Dollar, creating an opportunity for the Kiwi to climb. Traders might consider buying call options with strikes around the 0.6000 level to capitalize on this short-term momentum.
However, the Federal Reserve’s hawkish tone creates a significant headwind, which could cap the pair’s upside. The Fed has clearly signaled it is prepared to act if inflation does not cool, providing a floor for the US Dollar. This makes selling out-of-the-money put options on the NZD/USD risky.
To make this view more credible, we can see the latest US Consumer Price Index for April came in at 3.6%, still well above the Fed’s target and reinforcing their cautious stance. Meanwhile, New Zealand’s own central bank is also battling persistent inflation, with the latest RBNZ survey showing two-year inflation expectations holding firm at 2.8%. This strength in both economies suggests the currency pair may struggle to find a clear direction.
Geopolitical risks from the Middle East add another layer of uncertainty which could trigger sudden flights to the safety of the US Dollar. Any escalation reported in the news could quickly erase the Kiwi’s recent gains against the Greenback. This risk warrants using strategies with defined risk profiles.
Given these conflicting forces, we believe a range-trading strategy is prudent for the next few weeks. Recalling the sharp reversals we saw in late 2025 following similar mixed data releases, a defined-risk strategy like an iron condor could be effective. This allows traders to profit if NZD/USD remains caught between the weak US growth data and the hawkish central bank policies.
