- NZD/USD remains on the back foot after snapping a two-day uptrend.
- New Zealand Manufacturing Sales eased, activity recovered in Q1.
- US dollar stays firm on safe-haven demand ahead of Thursdays’ key events.
- China CPI, PPI may offer intermediate clues, sentiment-related headlines are crucial.
NZD/USD grinds lower, down 0.12% around intraday low of 0.7191, during Wednesday’s Asian session. The kiwi pair dropped the previous day amid broad US dollar strength whereas the recent weakness could be traced to the mixed manufacturing figures at home and cautious sentiment ahead of China’s headline inflation figures, namely the Consumer Price Index (CPI) and the Producer Price Index (PPI) for May.
New Zealand’s Q1 Manufacturing Sales eased from 0.5% to 0.4% but the Manufacturing Activity rose 2.1% versus -0.6% prior on a seasonally adjusted basis. The data adds to the downside pressure, earlier backed by the risk-off mood, onto the NZD/USD.
It’s worth noting that the market sentiment remains sluggish amid uncertainty over the Fed’s next move and anxious mood before Thursday’s key US inflation and ECB. Also favoring the risk-aversion, as well as the US dollar, is the escalating US-China tussle and a light calendar.
Amid a raw over the covid origin and US sanctions, the Sino-American tension got another worry from the US Senate. The American decision-makers are on the way to pass a $200 billion stimulus to have machines ready to compete with China. Elsewhere, market players remain divided over the reflation and the Fed’s action amid policymakers’ rejection of strong data.
Against this backdrop, US Treasury yields dropped nearly four basis points (bps) to 1.54% and put a bid under the US dollar. However, the Wall Street benchmarks couldn’t portray any clear direction for the second consecutive day.
Moving on, expected pick-up in China inflation figures may help the NZD/USD prices to consolidate the latest losses. However, the odds against such a move are high considering the dragon nation’s recent data disappointment. Also, the cautious mood before tomorrow’s key data/events add filters to the pair’s recovery.
Technical analysis
A confluence of 50-day and 100-day SMA around 0.7180 can test NZD/USD bears while a two-week-old falling trend line becomes a short-term important hurdle. It’s worth noting that the bearish MACD signals and fundamental strength of the US dollar favor the sellers.
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