New Zealand Dollar retreats as Chinese imports fall short of expectations

• The New Zealand Dollar weakens following mixed Chinese trade data for August.
• Chinese imports grow less than expected, fueling concerns over domestic demand.
• Broader US Dollar weakness limits losses ahead of United States inflation data.

NZD/USD declines 0.37% on Tuesday, trading around 0.5855 at the time of writing. The New Zealand Dollar (NZD) remains under pressure following the release of mixed trade data from China, New Zealand’s largest trading partner.

China’s trade surplus rises to $119.09B in August from $112.5B in July. Exports increase 25% YoY, accelerating from a 23.9% rise in the previous month.

However, Chinese imports grow 28.2% YoY, up from 27.5% in July but below the 30% expansion expected by markets. The disappointment suggests that Chinese domestic demand remains fragile and weighs on the New Zealand Dollar due to the close trade ties between China and New Zealand.

The downside in NZD/USD remains limited, however, by broader weakness in the US Dollar (USD). Investors now await the release of the United States (US) Producer Price Index (PPI) and Consumer Price Index (CPI) later this week for fresh clues about the monetary policy outlook of the Federal Reserve (Fed).

Expectations surrounding the Fed remain supported by the resilience of the US labor market. Nonfarm Payrolls (NFP) increased by 162K in August, while the Unemployment Rate remained unchanged. Markets now price in a more than 58% chance of a Fed interest-rate hike in September, according to the CME FedWatch tool.

Meanwhile, geopolitical tensions between the US and Iran continue to weigh on market sentiment. Tehran has threatened to strike US Oil and Gas infrastructure in Gulf countries in the event of another attack on Iran, following a fresh round of hostilities over the weekend.

Disruptions to traffic through the Strait of Hormuz, which accounted for around 20% of global Oil supply before the conflict, are also keeping energy prices elevated. New Zealand, which relies heavily on energy imports, remains exposed to a prolonged increase in energy costs. The combination of fragile Chinese demand and elevated energy prices could therefore continue to weigh on the New Zealand Dollar outlook, although US Dollar weakness is limiting the downside in NZD/USD for now.

NZD/USD technical analysis

In the one-hour chart, NZD/USD trades at 0.5858, keeping a soft bearish tone as it holds below the 100-hour simple moving average (SMA) at 0.5871 and the 200-hour SMA at 0.5893. The pair is attempting to stabilise just above nearby horizontal support at 0.5856, while the Relative Strength Index (RSI) around 46 suggests modest downward momentum rather than outright oversold conditions.

On the downside, an initial floor emerges at 0.5856, with a deeper support zone coming in near 0.5836 if selling pressure resumes. On the topside, immediate resistance appears at the 100-hour SMA around 0.5871, followed by the 200-hour SMA at 0.5893 and the horizontal barrier at 0.5903, which together form a dense supply area that bulls would need to clear to ease the current bearish bias.

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