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  • NZD/USD wavers around weekly top after a two-day winning streak.
  • New Zealand GDT Price Index data jumped, WMP rallied to the strongest in seven years.
  • DXY reversed from one-month top amid cautious sentiment ahead of the key events.
  • NZ Building Permits, ANZ Commodity Price Index, Aussie GDP and China’s Caixin Services PMI to decorate the Asian calendar.

NZD/USD is on its way to reverse the previous week’s heavy downfall while refreshing the weekly top with 0.7308 a few minutes back, currently around 0.7295, during the initial Asian session on Wednesday. In doing so, the kiwi pair justifies strong New Zealand (NZ) GDT Price Index data at home as well as the US dollar’ heaviest drop in one week.

NZ GDT Price Index surged to the highest since September 2015 while flashing a 15.0% mark in its latest reading versus 3.0% prior. Not only the headline figures but the details are also upbeat as average prices of the Whole Milk Powder (WMP) rose to the seven-year top of USD4,364/MT whereas volumes sold were also lower than the last year, giving another boost to the data via supply shortage.

In contrast to the NZ figures, there were no major data from the US while RBA offered help to the Australian dollar, also indirectly supporting the kiwi dollar, by restoring market confidence that the central banks won’t be swayed by the reflation fears.

On the same line, the latest Fedspeak also tried to placate fears of rising inflation to cause the monetary policy tightening. However, market players are waiting for Fed Chairman Jerome Powell’s speech, up for Thursday, to believe the central bankers. Also probing the sentiment could be the wait for US President Joe Biden’s $1.9 trillion stimulus as well as the UK budget.

Against this backdrop, the Wall Street benchmarks closed in red while the US 10-year Treasury yields dropped 3.6 basis points (bps) to 1.41% by the end of Tuesday’s North American session.

Looking forward, New Zealand’s Building Permits for January, prior 4.9% MoM, followed by February’s ANZ Commodity Price Index, previous 3.6%, will offer immediate direction to the NZD/USD traders. However, major attention will be given to Australia’s fourth-quarter (Q4) GDP, expected 2.5% QoQ versus 3.3% the last, as well as China’s Caixin Services PMI that eased to 52 during January.

In addition to the scheduled data and wait for the markets, not to forget the reflation fears, New Zealand’s virus conditions at home also challenge the NZD/USD bulls. As a result, risks to the upside remain on the table.

Technical analysis

An area surrounding highs marked in January and touched twice last month, around 0.7320, offers an immediate upside hurdle to the NZD/USD buyers. However, sellers are less likely to enter unless witnessing a daily closing below an ascending trend line from December 21, currently around 0.7195.

 

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