New Zealand Dollar inches higher as China’s Manufacturing PMI ticks up in August

NZD/USD remains subdued for the second successive day, trading around 0.5910 during the Asian hours on Monday. However, the NZD/USD pair pares some of its daily losses as the New Zealand Dollar receives minor support following the release of China's NBS Purchasing Managers' Index (PMI) data.

Although China’s Manufacturing PMI ticked up to 49.8 in August, beating expectations of 49.7 and improving from July's 49.2, and the Non-Manufacturing PMI held steady at 49.0. Given the close trade relationship between the two nations, shifts in the Chinese economy typically carry heavy influence over New Zealand's currency outlook.

New Zealand’s economic sentiment weakened as the ANZ Business Confidence Index fell to 53.7 in August from 56.1 in the previous month, while the Activity Outlook dropped to 48.2 from 49.3. Traders maintained a cautious stance ahead of the Reserve Bank of New Zealand's upcoming monetary policy decision, where markets broadly expect a 25-basis-point interest rate hike following a similar increase in May.

NZD positioning shifts as RBNZ hawkishness keeps hike expectations intact

According to TD Securities, the “hawkish July RBNZ rate hike” has prompted a notable repositioning in foreign exchange markets, with investors having “sharply pared back [their] short NZD positioning vs both the USD and AUD.” The bank notes that subsequent “NZ data releases since then have not provided enough evidence for market pricing to deviate from the RBNZ's latest OCR guidance.” In their view, this backdrop has helped cement expectations, as “consensus continues to expect another RBNZ rate hike at the upcoming meeting.”

Meanwhile, the US Dollar (USD) could find strong support from hawkish commentary by Federal Reserve Chair Kevin Warsh at the Jackson Hole symposium. Warsh signaled that policymakers "have work to do" if inflation does not clearly glide toward their target at an adequate pace, boosting market expectations for tighter policy. Following his remarks, the CME FedWatch tool showed traders pricing in a 57.5% chance of at least a 25-basis-point Fed rate hike at the September 15–16 meeting, up sharply from 35% previously.

Technical Analysis:

In the daily chart, NZD/USD trades at 0.5910. The pair holds a constructive near-term tone as it remains above the 50-day Exponential Moving Average (EMA), while only slightly capped by the short-term nine-day EMA. The 14-day Relative Strength Index (RSI) around 54 suggests mildly positive momentum without overbought conditions, hinting that buyers still have room to probe the upside as long as the price defends the underlying trend support.

On the topside, immediate resistance is located at the nine-day EMA at 0.5930, and a sustained break above this barrier would likely open the way for further gains. On the downside, initial support is provided by the 50-day EMA at 0.5864, with a daily close below this level undermining the current bullish bias and exposing the pair to a deeper corrective phase.

(The technical analysis of this story was written with the help of an AI tool. Know more.)