By Wayne Cole

SYDNEY, Dec 20 (Reuters) - The Australian and New Zealand dollars struggled to stay off two-year lows on Friday after a punishing week of losses against their U.S. counterpart cracked major support levels.

The Aussie wavered at $0.6232 , after sinking 2% for the week so far to as deep as $0.6199. The next major bear target is a trough from October 2022 at $0.65170, while it needs to recover $0.6337 to be on steadier ground.

The kiwi dollar was pinned at $0.5626 , having shed 3% for the week to as low as $0.5620. Support lies at its 2022 nadir at $0.5512, with resistance up at $0.5750.

Both were indirectly aided by a sharp retreat in the yen as markets scaled back wagers on a January rate hike from the Bank of Japan. The resulting short squeeze sent the Aussie surging 2% overnight to stand at 98.17 yen .

The kiwi lagged badly, however, after a surprisingly weak reading on the domestic economy fuelled bets for more aggressive policy easing. Markets are fully priced for the Reserve Bank of New Zealand to cut its 4.25% official cash rate (OCR) by an outsized 50 basis points when it next meets in February.

"It looks more likely that the OCR will trough a bit lower than previously thought," said Kelly Eckhold, head of New Zealand economics at Westpac.

"Following a 50bps rate cut at the February meeting, we have pencilled in an extra 25bp cut in the April meeting to join the one already envisaged in May, taking it to a trough of 3.25%."

Markets see rates bottoming around 3.0% early in 2026, when the RBNZ's own projection is for 3.4%.

A soft report on Australian growth led the Reserve Bank of Australia to take a dovish turn last week, and futures now imply around a 57% chance of a quarter-point rate cut in February.

Much will depend on the fourth-quarter consumer price report due in late January, where a low 0.6% reading for trimmed mean inflation could open the door for an easing.

"Trimmed mean inflation looks on course to annualize at around the 2.5% mid-point of the RBA's target band," said Andrew Boak, an economist at Goldman Sachs. "GDP growth has decelerated to a 32-year low, ex-pandemic, and real household disposable income per capita is dramatically underperforming OECD peers."

"While the macro picture could evolve in a different direction over the nine weeks before the RBA's February meeting, our conviction in our forecast out-of-consensus 25bp rate cut has strengthened."

(Reporting by Wayne Cole; Editing by Jamie Freed)

((Wayne.Cole@thomsonreuters.com; 612 9171 7144; Reuters Messaging: wayne.cole.thomsonreuters.com@reuters.net))