NZD/USD fell 0.37% on Tuesday and was trading near 0.5855, with the Kiwi pressured after mixed Chinese trade figures. China’s trade surplus widened to $119.09B in August from $112.5B in July, while exports rose 25% YoY following a 23.9% increase previously. Imports grew 28.2% YoY, up from 27.5% in July but below the 30% pace expected, tempering support for NZD given China’s role as New Zealand’s largest trading partner.
Losses were checked by broader USD softness as markets await US PPI and CPI for direction on Fed policy. US labour data showed NFP up 162K in August and the unemployment rate unchanged, and pricing implies a more than 58% chance of a September rate hike via CME FedWatch. Geopolitical risk also remains in focus, with threats involving US oil and gas infrastructure and potential disruption through the Strait of Hormuz, which accounted for around 20% of global oil supply pre-conflict, keeping energy prices elevated and raising New Zealand’s imported energy cost exposure. On the one-hour chart, NZD/USD sat at 0.5858 below the 100-hour SMA at 0.5871 and the 200-hour SMA at 0.5893; RSI near 46, support is seen at 0.5856 then 0.5836, with resistance at 0.5871, 0.5893 and 0.5903.
Trade Strategy and Macroeconomic Drivers
We recommend that derivative traders adopt a defensive, short-biased approach on the NZD/USD pair in the coming weeks. China remains New Zealand’s largest trading partner, historically absorbing around 30% of its total merchandise exports, meaning the disappointing 28.2% import growth directly dampens kiwi demand. As Chinese domestic recovery falters, we should prepare for continued downward pressure on the New Zealand Dollar.
We must also factor in rising energy costs, especially since New Zealand relies on foreign sources for over 90% of its crude oil and petroleum products. With geopolitical tensions threatening the Strait of Hormuz—a transit point for roughly 20% of the world’s petroleum liquids—elevated oil prices will likely worsen New Zealand’s trade balance. Traders can exploit this vulnerability by purchasing short-term put options on the NZD to hedge against a deeper economic slowdown.
Fed Policy, Technical Outlook, and Trade Recommendations
On the other side of the pair, we need to closely watch the upcoming US inflation data, especially since market pricing indicates a 58% probability of a Federal Reserve rate hike this month. Historically, when the Fed tightens policy while the Reserve Bank of New Zealand faces weak global demand, the yield spread widens in favor of the greenback. We suggest utilizing limit orders to sell NZD/USD on any temporary, news-driven rallies.
From a technical perspective, we advise setting stop-loss orders just above the dense supply zone between the 100-hour SMA at 0.5871 and the 200-hour SMA at 0.5893. If the pair breaks firmly below the immediate floor at 0.5856, we anticipate a rapid slide toward the next key support level at 0.5836. Keeping position sizes modest will help us navigate the heightened volatility expected around this week’s US CPI release.
