The NZD/USD pair fell slightly to around 0.5985 during the Asian session on Friday, weighed down by the appreciation of the US dollar. The lack of progress in dismantling the U.S.-China trade agreement is putting some selling pressure on the New Zealand dollar, China’s main currency. The final reading of Michigan’s consumer confidence index is due later on Friday.
U.S. President Donald Trump said Thursday evening that his administration is in talks with China on trade. Meanwhile, China stated that no negotiations took place on the economy and trade, and urged the United States to lift all unilateral tariff measures if it genuinely wants to resolve the issue. Concerns about trade tensions between the world’s two largest economies could undermine the value of the New Zealand dollar (NZD)., where China is a major trading partner of New Zealand.
Growing expectations that the Reserve Bank of New Zealand (RBNZ) will cut the official interest rate (OCR) at the May meeting may contribute to the depreciation of the New Zealand dollar. Markets strongly expect the Reserve Bank of New Zealand (RBNZ) to cut its official 3.5% interest rate by 25 basis points in May, with a further cut to 2.75% by the end of the year.
China’s Finance Ministry said on Friday that the current global economic growth momentum is insufficient, as tariffs and trade wars further affect economic and financial stability. Meanwhile, the Governor of the People’s Bank of China (PBOC), Pan Zhongsheng, noted that economic fragmentation and trade tensions continue to disrupt the industrial supply chain and weaken global growth momentum. However, any positive developments related to China’s stimulus measures may help in Reducing New Zealand Dollar Losses in the Near Term.
Bullish momentum pushes NZD/USD towards 0.6038 resistance
The NZD/USD pair may challenge the key resistance level at 0.6038, a six-month high. Technical indicators indicate a prevailing bullish momentum in the short term.
Initial support is at the nine-day EMA, which is currently at 0.5929
The NZD/USD made recent gains recorded in the previous session, trading around 0.5960 during early European trading hours on Friday.
Technical indicators on the daily chart indicate a bullish bias, with the pair remaining above the nine-day Exponential Moving Average (EMA), indicating an improvement in the price momentum in the short term.
Moreover, the 14-day Relative Strength Index (RSI) is above 50, indicating the prevailing bullish bias.
A rebound towards the 70 level could boost market sentiment to test a six-month high of 0.6038, last seen in November 2024.
A sustained breakout above a six-month high may open the door to exploring the surrounding area with a seven-month high near 0.6350, which was recorded in October 2024.
Initial support is at the nine-day exponential moving average at 0.5929. A break below this level could weaken the short-term bullish momentum, opening the door for further decline towards the 50-day EMA at 0.5781.
A further decline will deepen the bearish bias, putting downward pressure on the NZD/USD pair to test the support level at 0.5485, a level not seen since March 2020. China’s inflation rate is likely to rise.
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Reserve Bank of New Zealand cut official interest rate by 25 basis points
The New Zealand dollar recorded a positive performance on Wednesday. In the European session, the exchange rate of the New Zealand dollar/US dollar was 0.5566, up 0.59% on the day.
The Reserve Bank of New Zealand cut its official interest rate by 25 basis points to 3.5%. This is its lowest level since October 2022, and follows a significant 50 basis point cut in February.
The Reserve Bank of New Zealand has pursued a firm monetary easing policy, cutting interest rates by 200 basis points since August 2024. Today’s rate cut, the fourth in a row, was widely expected, but the New Zealand dollar made strong gains.
The Reserve Bank of New Zealand’s interest rate statement indicated that inflation remains close to the midpoint of the bank’s target range, which is between 1% and 3%. Members stated that the tariff war has led to downside risks to New Zealand’s growth and inflation, and that the central bank will continue to cut interest rates if necessary, based on the impact of tariffs and inflation expectations. U.S.-China trade war escalates
The trade war between the United States and China is escalating day by day. After China imposed 34% counter-tariffs on the United States, President Trump responded with 50 percent, raising the level of tariffs on Chinese products to a staggering 104 percent. A trade war between the world’s two largest economies will weaken global growth and hurt New Zealand’s economy, with China as its largest trading partner.
China releases its March inflation report on Thursday. The CPI is expected to rebound to 0.1% y/y, after falling 0.7% in February. The CPI is expected to remain steady at 0.2% m/m. If the trade war with the U.S. continues to escalate, China’s inflation rate is likely to rise.
