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NZDUSD: New Zealand dollar slides as bells of a new trade war ring


The NZDUSD pair dropped sharply as the market continued to worry about the relationship between New Zealand and China.

New Zealand fed with China

The differences between China and New Zealand started when the latter advocated for Taiwan’s membership to the World Health Organisation (WHO). In a statement yesterday, China berated New Zealand, saying that the country should “stop making wrong statements” on the issue.  In a statement today, New Zealand’s foreign minister said that the country will stand for itself on the Taiwan issues. In addition, Winston Peters said that, “true friendship is based on equality. It’s based on the ability in this friendship to nevertheless disagree.”

In recent weeks, Taiwan has been lobbying to be allowed to become an observer in the World Health Assembly (WHA). China, a major funder of the WHO, has opposed this because it believes that Taiwan is a member of China.

China and New Zealand trade relations

The new conflict risks the multibillion-dollar trade between the two countries. In 2019, China became the biggest trading partner with more than N$30 billion in exports and imports. New Zealand’s exports goods worth more than $17 billion to China and imports goods worth about $13 billion. Therefore, a major conflict would have dire consequences.

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NZDUSD technical outlook

On the four-hour chart, the NZD/USD pair has been on a slow upward trend since early April. As shown below, the pair is along the 50-day and 100-day exponential moving average and along the 61.8% Fibonacci retracement level. The pair has also formed an equidistance channel shown in pink. Therefore, there is a possibility that the pair will move to retest the lower part of the channel at 0.6000. On the other hand, a move above 0.6150 will invalidate this trend.

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