New Zealand Dollar weakens on stronger US Dollar, eyes on Chinese data

• The New Zealand Dollar edges lower in Friday’s early Asian session. 
• A fall in New Zealand’s two-year inflation expectations and a firmer US Dollar weigh on the pair. 
• Traders await the Chinese CPI and PPI data, which are due on Friday. 

The New Zealand Dollar (NZD) trades with a mild bearish bias on Friday amid renewed US Dollar (USD) demand. The Greenback advances to a weekly high as the recent US Initial Jobless Claims ease some fears about the US labor market. A fall in New Zealand's two-year inflation expectations might cap the upside for the NZD. Additionally, the heightened geopolitical risks in the Middle East could weigh on riskier assets like the Kiwi and create a headwind for NZD/USD. 

On the other hand, a stronger-than-expected New Zealand employment report earlier this week threw cold water on expectations of the Reserve Bank of New Zealand (RBNZ) interest rate cut in the near term. The upbeat reading could be enough to spur another bullish run for the Kiwi in the near term. Traders will keep an eye on Chinese economic data on Friday, including Consumer Price Index (CPI) and Producer Price Index (PPI) for July. Any signs of recovery in the Chinese economy could lift the Kiwi as China is New Zealand's largest trading partner. 

Daily Digest Market Movers: New Zealand Dollar loses ground amid stronger US Dollar

• According to RBNZ's latest monetary conditions survey, the two-year inflation expectations fell from 2.33% seen in Q2 2024 to 2.03% in Q3 of this year. The average one-year inflation expectations declined to 2.40% in Q3 versus 2.73% seen in Q2. 
• The US Initial Jobless Claims for the week ending August 3 rose by 233K, compared to the previous week of 250K (revised from 249K), the US Department of Labor (DoL) reported on Thursday. This figure came in below the consensus of 240K. 
• Continuing Claims increased by 6K to 1.875M in the week ended July 27, beating the estimation of 1.870M. 
• Federal Reserve (Fed) Bank of Chicago President Austan Goolsbee said on Thursday that the Fed needs to see more than payrolls and more than one month.
• Richmond Fed President Thomas Barkin noted that cooling in the US labor market is coming from slower hiring rather than a rise in layoffs, giving the Fed time to figure out its next move. 

Technical Analysis: New Zealand Dollar remains bearish in the longer term

The New Zealand Dollar trades stronger on the day. However, the bearish stance of the NZD/USD pair prevails on the daily chart, with the price remaining below the key 100-day Exponential Moving Average (EMA). Nonetheless, the RSI hovers around the 50-midline, suggesting a potential for consolidation cannot be ruled out. 

The 100-period EMA near 0.6050 could act as a potential upside barrier for NZD/USD. If the price manages to break above this level, it would indicate the possibility of further upside. The next hurdle is seen at 0.6112, the upper boundary of the Bollinger Band. 

On the downside, the initial support level emerges at 0.5912, a low of August 6. Further south, the additional downside filter to watch is the 0.5850-0.5840 region, representing a low of April 19 and the lower limit of the Bollinger Band.