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

The New Zealand Dollar (NZD) edged higher on Monday, buoyed by a slight improvement in China's Manufacturing PMI. The China Purchasing Managers Index (PMI) for August rose to 49.8, surpassing expectations of 49.7 and marking an improvement from July's 49.2. While the Non-Manufacturing PMI remained unchanged at 49.0, the economic relationship between China and New Zealand suggests that fluctuations in the Chinese economy often impact the latter's currency outlook.

However, New Zealand's economic sentiment took a hit, with the ANZ Business Confidence Index slipping to 53.7 from 56.1 in the prior month, and the Activity Outlook falling to 48.2 from 49.3. Traders remain cautious as the Reserve Bank of New Zealand (RBNZ) prepares to make a monetary policy decision. Currently, markets anticipate a 25-basis-point interest rate hike following the May increase.

The NZD's resilience is attributed to the hawkish comments from Federal Reserve Chair Kevin Warsh at the Jackson Hole symposium, which has prompted some investors to reduce their short NZD positions against the USD and AUD. The prospect of another RBNZ rate hike at the upcoming meeting continues to dominate expectations. On the technical side, NZD/USD trades at 0.5910, supported by the 50-day Exponential Moving Average (EMA) and displaying positive momentum as indicated by the 14-day Relative Strength Index (RSI) around 54.

The pair's near-term outlook remains constructive, with resistance at the 9-day EMA at 0.5930 and potential support at the 50-day EMA at 0.5864.