Forex trading is slowing down as the holidays approach, offering a pause after significant movements driven by various news events, including central bank decisions.

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Notably, NZD/USD reached its lowest level since October 2022 at the end of last week.

The decline in NZD/USD has been influenced by two main factors:

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1. The dollar gained momentum following the Federal Reserve’s decision to lower the interest rate by 0.25% and its forward guidance for 2025.

2. According to Reuters:

→ New Zealand’s economy contracted much more sharply than expected in the second and third quarters.

→ Market participants anticipate that the Reserve Bank of New Zealand may lower interest rates by 0.5% in February.

Technical analysis of the NZD/USD 4-hour chart depicts a bearish outlook:

• The 0.58 level, which served as support in November, turned into resistance in December.
• The price is currently hovering near the lower boundary of a descending channel that has been in place since October.
• The RSI indicator signals that the market is approaching oversold conditions.

While bears may attempt to extend the downtrend by pushing the price below last week’s low, this could create a divergence pattern on the RSI indicator, offering hope for a potential bullish reversal.

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