NZD/USD Price Forecast: Walks on thin rope near 0.5600

• NZD/USD faces selling pressure as the US Dollar performs strongly.
• The Fed is expected to follow a gradual policy-easing cycle as officials worry about a slowdown in the disinflation trend.
• China's inflation grew at a slower pace in December, which weighs on the NZ Dollar.

The NZD/USD pair rises slightly after posting a fresh more-than-two-year low of 0.5570 in Thursday's North American session but is still down quarter-to-a-percent. The outlook of the Kiwi pair remains bearish as the US Dollar (USD) performs strongly across the board on expectations that the Federal Reserve (Fed) will follow a gradual rate-cut approach this year.

Market speculation for a slower Fed policy-easing path is backed by commentary from officials that progress in the disinflation trend could stall by potential trade and immigration policies, as shown by the latest Federal Open Market Committee (FOMC) minutes.

Meanwhile, investors await the US Nonfarm Payrolls (NFP) data for December, which will be published on Friday. The US NFP report is expected to show that the economy added 154K workers in December, fewer than 227K additions in November. The Unemployment Rate is seen steady at 4.2%. Investors will pay close attention to the US labor market data as it will influence market expectations about when the Fed will deliver its first interest rate cut of this year.

The New Zealand Dollar (NZD) faces selling pressure as China's inflation has slowed in December as expected. China's annual Consumer Price Index (CPI) rose by 0.1%, slower than the former release of 0.2%. Being a proxy to China's economy, the Kiwi dollar faces pressure on expectations of poor business outlook in the New Zealand (NZ) region.

NZD/USD finds a temporary cushion near the two-year low of 0.5520 on a weekly timeframe. However, the outlook for the Kiwi pair remains bearish, as the 20-week Exponential Moving Average (EMA), which trades around 0.5867, 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