• NZD/USD attracts some dip-buyers following a bearish gap opening at the start of a new week.
• Stagflation fears trigger a modest USD pullback from over a one-month high and support the pair.
• The RBNZ’s accommodative policy outlook and rising geopolitical tensions might cap the NZD.

The NZD/USD pair finds decent support near the lower boundary of an over one-week-old range and attracts some buyers near the 0.5950-0.5945 region during the Asian session on Monday. Spot prices, however, remain below the 0.6000 psychological mark amid a fresh wave of the global risk-aversion trade.

The US and Israel launched a coordinated military strike on Iran, killing Supreme Leader Ayatollah Ali Khamenei. Adding to this, Iran's Islamic Revolutionary Guard Corps (IRGC) Navy announced the closure of a critical maritime chokepoint – the Strait of Hormuz – and raised the risk of a protracted war in the Middle East. This marks a dramatic escalation of geopolitical tensions in West Asia over the weekend unsettles global markets at the start of the new week, which, in turn, prompted some intraday selling around the risk-sensitive Kiwi.

Meanwhile, the safe-haven US Dollar (USD) struggles to capitalize on its modest intraday gains and retreats from the highest level since January 23 amid renewed stagflation fears. A stronger US Producer Price Index (PPI) for January comes on top of slowing economic growth, creating a scenario where the Federal Reserve (Fed) cannot cut interest rates without reigniting inflation or hold without slowing the economy further. This, in turn, keeps a lid on any meaningful USD appreciation and helps the NZD/USD pair to reverse an intraday fall.

Meanwhile, the Reserve Bank of New Zealand (RBNZ) reiterated an accommodative policy outlook in February amid expectations that inflation will return to the target over the next year. Traders were quick to react and pushed back the likely timing for a rate hike further into late-2026. This, in turn, could act as a headwind for the New Zealand Dollar (NZD) and cap the upside for the NZD/USD pair, making it prudent to wait for a breakout through a short-term trading range before positioning for the next leg of a directional move.