Search ForexCrunch
  • NZD/USD remains mildly negative for the second consecutive day.
  • China’s RRR cut and US-China trade optimism should have offered an additional boost to the Kiwi.
  • Traders await confirmation of Chinese manufacturing recovery amid holidays in New Zealand and Japan.

NZD/USD trades on the back foot near 0.6720 amid the initial Asian session on Thursday. Despite recovering in the last few minutes, the prices are still in the negative for the second day in a row. Traders might be waiting for the Caixin Manufacturing PMI before cheering the recent trade-positive news from China.

Among them, the People’s Bank of China (PBOC) 50 basis points (bps) Reserve Ratio Requirement (RRR) cut, effective from January 5, grabs the headline. The same is likely to increase the flow of funds into the market after the Chinese central bank announced changes to the benchmark lending rate during the weekend.

Also being a positive signal is the US-China trade relations. After the confirmation of Chinese Vice Premier Liu He’s trade visit to Washington, the US President Donald Trump also said that the phase-one will be signed on January 15 and talks for phase-two will begin with this China meet then after. Confirming the optimism is White House Advisor, Peter Navarro, who recently mentioned that phase one trade deal is “in the bank”.

Even so, the absence of traders and the on-going political tension between the US and the Middle East might have been the reason for the kiwi pair’s recent weakness despite the upbeat catalyst. Additionally, traders are likely to wait for the confirmation of China’s manufacturing strength after the official PMI data flashed back-to-back above 50 mark recently. In doing so, December month Caixin Manufacturing PMI, expected 51.7 from 51.8, will be observed closely.

Following the release of China’s PMI, markets may concentrate on trade headlines and wait for the US data, including Markit Manufacturing PMI and weekly Initial Jobless Claims for fresh impulse.

Technical Analysis

Buyers will keep targeting an area including highs marked since April 12, near 0.6783/92, unless prices close below a two-week-old rising trend line and 61.8% Fibonacci retracement of March-September fall, around 0.6660/55.