NZD/USD Price Forecast: Wobbles around two-year low of 0.5300

• NZD/USD gains to near 0.5630 as the US Dollar ticks lower in a thin trading volume day.
• The Fed is expected to cut interest rates two times next year.
• Investors expect that the RBNZ will cut interest rates by 50 bps in February.

The NZD/USD pair moves higher to near 0.5630 in Friday's North American session. The Kiwi pair gains as the US Dollar (USD) drops in a holiday-thinned trade. The US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, ticks lower to near 107.90.

The near-term outlook for the Greenback remains firm, as the Federal Reserve (Fed) has guided a more gradual rate-cut approach for 2025. A recent Fed dot plot showed that policymakers collectively see Federal Fund rates heading to 3.9% by the end of 2025, suggesting that there will be two interest rate cuts of 25 basis points (bps) next year.

Meanwhile, the broader outlook for the New Zealand Dollar (NZD) remains weak, as the Reserve Bank of New Zealand (RBNZ) is expected to continue aggressively reducing interest rates. The NZ economy sank into a recession in the third quarter, fueling the need for more interest rate cuts.

The RBNZ has already reduced its key Official Cash Rate (OCR) by 125 bps this year and is expected to cut further by 50 bps in the policy meeting in February.

NZD/USD finds a temporary cushion near the two-year low of 0.5520 on a weekly timeframe. The outlook of the Kiwi pair remains bearish as the 20-week Exponential Moving Average (EMA), which trades around 0.5900.

The 14-week Relative Strength Index (RSI) slides to near 30.00, suggesting a strong bearish momentum.

The Kiwi pair could decline to near the four-year low of 0.5470 and the round-level support of 0.5400 if it breaks below the psychological support of 0.5500.

On the other hand, a decisive break above the November 29 high of 0.5930 could drive the pair to the November 15 high of 0.5970 and the psychological resistance of 0.6000.

NZD/USD daily chart