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  • NZD/USD pauses the year-start drop amid a lack of major catalysts.
  • Broad USD recovery amid sparse trading conditions gave kiwi buyers a chance to book profits after many days of riding north.
  • Trade optimism remains, US ISM Manufacturing PMI, FOMC minutes will offer immediate guidance.

NZD/USD trades near 0.6700 at the start of Friday’s Asian session. The kiwi pair began 2020 on a back foot as broad USD recovery played its role. However, New Zealand (NZ) traders’ reaction to the latest pullback will be watched closely as they begin in 2020 after the year-start holidays.

Optimism surrounding the US-China trade relations, especially after comments from the US President Donald Trump, failed to extend the kiwi pair’s run-up beyond multi-month highs as the greenback recovered across the board. While thin trading conditions could have opened the door for the latest profit-booking, fundamentals from the US, Markit Manufacturing PMI and Initial Jobless Claims, failed to provide any clear reason.

Even so, bond yields step back and Wall Street also failed to hold the initial rally amid the US-Middle East tussle. The US 10-year treasury yields drop 35 basis points (bps) to 1.875% by the press time. Speculations that Iran or Iran-backed armies prepare to attack the US forces in the Middle East gained attention recently.

Despite the NZ market’s open, the economic calendar is broadly silent in Asia and hence expectations of the previous trend to continue, amid sparse trading, are high. Though, the US FOMC Minutes and monthly figures of ISM Manufacturing PMI will be the key to watch during the later part of the day.

Analysts at TD Securities anticipate a mild improvement in ISM data as they say, “The U.S. data highlight will be the manufacturing ISM index for December. We expect the index to rise slightly, to a still-low 49.5 from 48.1. The consensus is 49.0. A slight rise would be consistent with the regional surveys that have been released.”

Technical Analysis

Sustained trading below 0.6700 can drag prices towards December 13 high surrounding 0.6635 whereas 0.6755/60 offers short-term resistance to the pair.