NZD Holds Above Support as Chinese PMI Surprises Higher

Key Moments

NZD/USD Finds a Floor as DXY Eases From Two-Month High

The New Zealand Dollar is modestly stronger against the US Dollar during the Asian trading session on Wednesday, with NZD/USD up 0.11% and changing hands near 0.5645. The pair has bounced after finding support around 0.5625 on Tuesday, following a pronounced downward move over recent weeks.

The latest uptick coincides with a minor pullback in the US Dollar Index (DXY), which is correcting slightly after revisiting a two-month peak at 101.64. Despite the intraday recovery in NZD/USD, the broader tone for the pair remains fragile.

Market participants still anticipate a resilient US Dollar, reflecting expectations that the Federal Reserve will maintain a firm policy stance for an extended period.

Fed Expectations and Energy Prices Underpin the Greenback

Analysts at MUFG/BTMU describe a rate outlook that continues to favor the US Dollar. They note that, after delivering their first hike this month, the US rate market now expects the Fed to deliver “almost another 100bps of rate hikes in the year ahead,” a trajectory that is “reinforcing support for the US Dollar from the positive terms of trade shock for the US economy from higher energy prices.” According to their assessment, “the current backdrop is supportive of the US Dollar remaining stronger for longer.”

Comments from Federal Reserve officials also keep the prospect of additional tightening in focus. On Tuesday, New York Fed Governor John Williams stated that “one further hike likely this year” if inflation remains entrenched. At the same time, he emphasized that there is “no need for urgency after September rate hike and more data will help the Fed decide what’s next for rate policy.”

China’s RatingDog Manufacturing PMI Beats Expectations

Economic data from China has provided a supportive backdrop for risk-sensitive currencies such as the New Zealand Dollar. China’s RatingDog Manufacturing Purchasing Managers’ Index (PMI) for September came in above expectations, registering 52.1 versus a consensus of 51.6 and an earlier reading of 51.5.

In theory, stronger Chinese manufacturing activity tends to be constructive for the New Zealand Dollar, given the New Zealand economy’s significant exposure to exports to Beijing.

NZD/USD Technical Picture: Bearish Bias Persists Below Key Moving Average

On the daily chart, NZD/USD is trading around 0.5645 and continues to exhibit a bearish short-term profile. The pair remains capped beneath the 20-day exponential moving average (EMA), currently situated at 0.5736, which is acting as a dynamic resistance zone.

Momentum indicators underline the prevailing downside pressure. The Relative Strength Index (RSI) stands at 27, firmly in oversold territory, suggesting that while selling momentum is still dominant, it may be nearing a point of fatigue.

On the upside, the initial resistance level is located at the 20-day EMA around 0.5736. A recovery above this barrier would be required to alleviate immediate selling pressure and open room for a corrective rebound. As long as NZD/USD trades below this threshold, the wider technical backdrop continues to favor further weakness, with any attempts to recover likely facing headwinds while price action stays under the moving average.