NZD/USD: Bears flirt with 0.7000 on mixed NZ trade data after biggest slump in a year

• NZD/USD bears catch a breather around four-month low.
• New Zealand’s Exports, Trade Balance (MoM) recovered in February, Imports eased.
• Dovish catalysts joined mixed Fedspeak and NZ housing measures to portray the heaviest drop in a year.
• US Durable Goods Orders can entertain traders, risk news keep the driver’s seat.

NZD/USD holds lower ground near November lows, recently bouncing off 0.6989 to 0.7010, like New Zealand (NZ) trade numbers battle bears during Wednesday’s initial Asian session. However, the kiwi sellers aren’t gone home as challenges to sentiment, which portrayed the big slump the previous day, prevails.

NZ Trade Balance reversed the previous deficit of -647M with $181M figures while the yearly data eases from $2.73B to $2.36B. Further details suggest that the Exports grew past-$4.2B whereas Imports drops below $4.85B to $4.29B.

Although the absence of disappointment trade numbers probes NZD/USD bears by the press time, risk aversion waver and likely challenges to the NZ economy keep them hopeful.

Talking about the risks, Fed policymakers, including Chairman Jerome Powell, backs the need for stimulus despite differing over the rate hike timing. On the other hand, Treasury Secretary Janet Yellen defends the coronavirus (COVID-19) stimulus by eyeing the full economic recovery before the end of 2022, also rejecting the tax-hike concerns.

On the other hand, the virus-led lockdown in Germany and Netherlands as well as the Western tussle with Beijing, over Xinjiang human rights violations, add to the risk-off mood.

At home, Tuesday’s housing market measures seem to be too hard to cool down the growth engine of the kiwi economy and become negative for the NZD/USD at the time when the NZ GDP already disappointed bulls the previous month. In this regard, the Australia and New Zealand Banking Group (ANZ) said, “We think a further downward adjustment in OCR expectations is likely over coming days; USD gyrations aside, that speaks to headwinds for the NZD for a little longer. A break of 0.70 – if it occurred – would be a bad sign technically – the next support level below 0.70 is miles away.”

Amid these plays, Wall Street benchmarks dropped nearly 1.0% whereas the US 10-year Treasury yield fell six basis points (bps) to retest a one-week low around 1.62% by the end of Tuesday’s North American session.

Looking forward, the US Durable Goods Orders for February, expected to ease from 3.4% YoY to 0.8%, will precede the second version of testimony by Fed’s Powell. Although nothing new is expected to arrive from Powell, the fears of hearing about more challenges to the world’s largest economy and the covid headlines could weigh on the NZD/USD prices.

Technical analysis

A clear downside break of 100-day SMA and a three-month-old support line, currently around 0.7120-25, directs NZD/USD bears to the 200-day SMA level of 0.6866. However, the 0.7000 psychological magnet seems to test the quote’s further downside by the press time.