New Zealand Dollar struggles after China’s Trade Balance data

The New Zealand Dollar (NZD) faced further losses on Tuesday, trading near 0.5850 after three consecutive days of decline. The currency's depreciation was linked to China's August Trade Balance data, which remained in line with expectations at $119.09 billion, slightly higher than July's figure of $112.5 billion. While New Zealand's exports surged by 25% year-over-year, imports expanded by 28.2%—slightly higher than the 27.5% growth seen in the previous month, but falling short of the anticipated 30% expansion.

The Kiwi Dollar's weakness could be tempered by a potential downturn in the US Dollar, as traders factor in a more than 60% chance of a Federal Reserve rate hike in September, following a stronger-than-expected August US labor report. Investors are now eagerly awaiting upcoming US Producer Price Index and Consumer Price Index reports to gauge the Fed's upcoming policy move.

Currently, NZD/USD hovers at 0.5850, underperforming both the 50- and nine-day Exponential Moving Averages (EMAs), indicating a bearish short-term outlook. The 14-day Relative Strength Index (RSI) has dipped towards the low-40s, suggesting fading bullish momentum, which may lead to selling pressure as the price remains restrained beneath these moving averages.

On the upside, immediate resistance could be found at the 50-day EMA at 0.5867, with a subsequent hurdle at the shorter-term 9-day EMA near 0.5887. A daily close above this level could help alleviate the current downside bias. Conversely, the absence of nearby structural price levels leaves the NZD vulnerable to further declines, as the soft RSI profile and the cooling FXS Fed Sentiment Index further heighten the risk of renewed downward pressure if buyers fail to reclaim the overhead EMA cluster.