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New Zealand Dollar struggles after China’s Trade Balance data

  • NZD/USD depreciates following China's August trade data, which showed weaker-than-expected import growth of 28.2%.
  • Disappointing Chinese import expansion weighs heavily on the Kiwi Dollar due to strong bilateral trade ties.
  • Downside losses remain capped by broader US Dollar weakness ahead of upcoming US inflation readings.

NZD/USD extends its losses for the third successive day, trading around 0.5850 during the Asian hours on Tuesday. The pair is depreciating as the New Zealand Dollar (NZD) remains under pressure following the release of trade data from China, New Zealand’s major trading partner.

China's August Trade Balance reached $119.09 billion, aligning closely with forecasts and improving on July's $112.5 billion figure. Exports grew by 25% year-over-year, accelerating from July's 23.9% increase. However, imports rose by 28.2% year-over-year—a slight pickup from the previous month's 27.5% growth, but falling short of the 30% expansion expected by markets.

Despite this softness in the Kiwi Dollar, further downside for the NZD/USD pair may be cushioned by ongoing weakness in the US Dollar. The Greenback could regain its footing soon, however, as traders price in a greater than 60% probability of a Federal Reserve rate hike in September, bolstered by a stronger-than-expected August US labor report.

US Nonfarm Payrolls expanded by 162,000 while the Unemployment Rate held steady. Investors are now awaiting the upcoming US Producer Price Index and Consumer Price Index reports later this week to gauge the Fed's next policy move.

Technical Analysis:

In the daily chart, NZD/USD trades at 0.5850, keeping a bearish near-term tone as it holds below both the 50- and nine-day Exponential Moving Averages (EMAs). The 14-day Relative Strength Index (RSI) has retreated toward the low-40s, hinting at fading bullish momentum rather than outright oversold conditions, which suggests rallies are likely to face selling pressure while price remains capped beneath these moving averages.

On the topside, immediate resistance is seen at the 50-day EMA around 0.5867, with a subsequent hurdle at the shorter-term 9-day EMA near 0.5887, where a daily close above would be needed to ease the current downside bias. On the downside, the lack of nearby structural price levels leaves the pair vulnerable to further slippage, with the soft RSI profile and the cooling FXS Fed Sentiment Index backdrop reinforcing the risk of renewed declines if buyers fail to reclaim the overhead EMA cluster.

Chart Analysis NZD/USD

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

New Zealand Dollar FAQs

The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.

The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.

Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.

The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.

Author

Akhtar Faruqui

Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.

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