NZD/USD Price Forecast: Gains ground near 0.5600

• NZD/USD holds key support of 0.5600 as the NZD rebounds after PBoC's dovish guidance on interest rates.
• The US Dollar declines as the Fed is expected to follow a more gradual policy-easing approach this year.
• Investors await the US ISM Manufacturing PMI data for December.

The NZD/USD pair gains firm-footing near the round-level support of 0.5600 in Friday's North American session. The Kiwi pair rebounds as the New Zealand Dollar (NZD) bounces back after reports that the People's Bank of China (PBoC) will reduce its reserve ratio requirements (RRR) and interest rates further this year "at an appropriate time".

The PBoC stated that monetary policy adjustments are needed to "promote a steady decline in corporate financing and household credit costs." The central bank also highlighted that expansionary interest rate policies will "promote stabilisation and recovery of property market". The Kiwi dollar capitalizes on expectations of China's lenient monetary policy stance as New Zealand is one of the leading trading partners of China.

Meanwhile, a slight sell-off in the US Dollar (USD) has also pushed the Kiwi pair higher. The US Dollar Index (DXY), which gauges the Greenback's value against six major currencies, slides to near the key support of 109.00 in Friday's North American session. Still, it is close to an over-two-year high of 109.55.

The Greenback remains broadly firm as the Federal Reserve (Fed) is expected to follow a "slower and cautious" interest rate cut approach. The Fed has signaled fewer interest rate cuts for this year. Meanwhile, investors await the United States (US) ISM Manufacturing Purchasing Managers' Index (PMI) data for December, which will be published at 15:00 GMT.

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 0.5868, is declining.

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 13-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 flip side, 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 weekly chart