NZD/USD: New Zealand dollar finds resistance as trade surplus hit record

Written by: Crispus Nyaga
May 26, 2020
  • The NZD/USD pair rose slightly after the mixed trade numbers from New Zealand.
  • Exports declined by 4% to $5.3 billion while imports fell by 22% to $4 billion.
  • This led to a trade surplus of more than $1.3 billion, a record.

The NZD/USD pair rose by more than 50 basis points as the market reacted to the April trade data from New Zealand.

New Zealand dollar
NZD/USD rises as trade surplus surged

New Zealand imports fell in March

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New Zealand has been praised for its response to the coronavirus pandemic. The disease has only infected about 1,500 people and killed just 21. That is a remarkable feat for a country of more than 5 million. The country achieved this by implementing one of the strictest lockdowns globally.  

The latest data from Statistics New Zealand show that the country’s exports and imports declined sharply in April because of the lockdown.

The country imported goods worth $4.0 billion in April, down by $1.1 billion from April 2019. That was a 22 per cent decline and was the second-largest decline since 1960 when records began.

The decline in imports was mostly due to a sharp fall in petroleum, vehicles, and machinery. Petroleum products declined by 58 per cent, with crude oil imports declining by about 77 per cent. Motor vehicles and parts, aircraft and parts, and electrical machinery and equipment also declined.

This decline was partially offset by a sharp increase in the exports of face masks and laptops. The country imported masks worth more than $65 million and laptops worth more than $43 million. That was mostly because people transitioned to working from home.

Regionally, the biggest decline in imports was from the European Union, where they declined by 40 per cent to $405 million. That was mostly because of a decline in aircraft shipments. Imports from Japan and Australia also decreased.

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NZD/USD reacts to exports decline

New Zealand exports declined by 4 per cent to $5.3 billion in April, the sharpest decline in more than a decade.

This decline was mostly because of a sharp $211 million decline in logging exports. In a statement, Statistics New Zealand said:

“Log harvesting was a non-essential service under alert level 4 and didn’t restart until alert level 3 at the end of April, so it is understandable that log exports have dropped sharply.”

The decline in logging was offset by higher milk powder exports, which rose by 29 per cent. A jump in Gold kiwifruit demand from Japan also helped.

In total, sales to Australia, European Union, and China declined by more than $160 million, European Union, and China dropped by $160 million, $92 million, and $42 million from April 2019.

In total, the country’s trade surplus jumped to $1.3 billion, the highest level on record.

NZD/USD technical outlook

The NZD/USD pair reached a bottom of 0.5471 on March 19 at the peak of the coronavirus tensions. The pair has since then recovered and is up by more than 13% from its YTD low. The currency has found some resistance due to the talk of negative interest rates by the RBNZ.

NZD/USD technical forecast

On the daily chart, the price is slightly above the 50-day exponential moving average and the 50% Fibonacci retracement. The price is slightly below the 100-day EMA. The price appears to be forming a double top pattern at about 0.6153. Therefore, a move above this resistance will mean that bulls have prevailed, and they will attempt to retest the 61.8% Fibonacci retracement of 0.6270.

On the other hand, NZD/USD bears will prevail if the price moves below the 50-day EMA at 0.6077.