NZD/USD recovers further from six-month low, retakes 0.5800 amid a weaker USD

• NZD/USD attracts buyers as the USD pulls back from its highest level since late August.
• Fed rate cut bets and the US government shutdown capped the recent USD move higher.
• Easing geopolitical tensions further weigh on the safe-haven buck and benefit the Kiwi.

The NZD/USD pair builds on the previous day's goodish rebound from the 0.5735 region, or the lowest level since April 11, and gains some positive traction during the Asian session on Thursday. Spot prices climb back above the 0.5800 mark amid a modest US Dollar (USD) weakness, though the upside potential seems limited in the wake of the Reserve Bank of New Zealand's (RBNZ) dovish outlook.

Against the backdrop of bets for more rate cuts by the Federal Reserve (Fed), concerns that a prolonged US government shutdown will affect the economic performance keep a lid on the USD's weekly uptrend. Furthermore, the Israel-Hamas agreement to the first phase of the peace deal boosts the global risk sentiment and drags the safe-haven buck away from its highest level since late August, touched on Wednesday. This, in turn, is seen as a key factor acting as a tailwind for the NZD/USD pair.

Meanwhile, the RBNZ decided to lower the Official Cash Rate (OCR) by 50 basis points (bps), to 2.50% from 3.00%, compared to the broader market expectations for a 25 bps rate reduction. Moreover, the central bank showed readiness to cut the OCR further as required for inflation to settle sustainably near the 2% target midpoint in the medium term. This might hold back traders from placing aggressive bullish bets around the New Zealand Dollar (NZD) and might cap the NZD/USD pair.

Even from a technical perspective, the week's rejection slide from the very important 200-day Simple Moving Average (SMA) warrants some caution for bulls. Investors now look forward to Fed Chair Jerome Powell's appearance later during the North American session for cues about the rate-cut path. This, in turn, will influence the USD and provide some meaningful impetus to the NZD/USD pair in the absence of any relevant US macro data on the back of the US government closure.