NZD/USD struggles below mid-0.5900s/monthly low as traders await Iran's response to US strikes

• NZD/USD attracts sellers for the third straight day and is pressured by a combination of factors.
• Rising geopolitical tensions boost the safe-haven USD on the back of the Fed's hawkish pause.
• Bets more RBNZ rate cuts, trade-related uncertainties, and a weaker risk tone undermine the NZD.

The NZD/USD pair opens with a modest bearish gap at the start of a new week and moves further away from the year-to-date peak, around the 0.6100 neighborhood touched last Monday. Spot prices drop to a fresh monthly low, around the 0.5930 region during the Asian session, and seem vulnerable to slide further amid the anti-risk flow.

The US joined Israel in the military action against Iran and bombed three nuclear facilities on Sunday. As investors await Iran's response to US strikes, concerns about a further escalation of geopolitical risks in the Middle East take its toll on the global risk sentiment. This, in turn, is seen driving safe-haven flows towards the US Dollar (USD) and undermining demand for the risk-sensitive Kiwi.

Meanwhile, the USD drew additional support from the Federal Reserve's (Fed) hawkish signals last week. In fact, the Fed retained the forecast for two rate cuts in 2025 but trimmed the outlook for rate cuts in 2026 and 2027. The Reserve Bank of New Zealand (RBNZ), on the other hand, is expected to lower borrowing costs further amid lower inflation and the economic headwinds from US tariffs.

Even from a technical perspective, last week's breakdown through the lower boundary of a short-term trading range and a close below the 0.6000 psychological mark suggests that the path of least resistance for the NZD/USD pair is to the downside. This, in turn, backs the case for a further near-term depreciating move as traders now look forward to the release of the flash US PMIs for a fresh impetus.