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  • NZD/USD trades near one-week low after Thursday’s heavy fall.
  • New Zealand’s Business NZ PMI rose in May to 39.7 from 26.1.
  • The market’s previous risk-off mood seems to fade amid a lack of major catalysts.
  • Risk factors remain as the key drivers as economic calendar dwindles in offerings.

NZD/USD bounces off intraday low of 0.6405, also the lowest since June 04, to 0.6420 amid the early Asian session on Friday. While the post-Fed risk aversion printed heavy losses of the kiwi pair, the recently released second-tier data from New Zealand seems to offer breathing space to the bears near technical support.

New Zealand’s May Month Business NZ Bank PMI crosses the earlier reading of 26.1 with 39.7 seasonally adjusted figures. Other than the data, news that the Fed funds futures on some of the year 2021 contracts close with the negative implied rate for the first time in a week also favored the kiwi pair’s pullback moves. The news suggest the Fed could take measures to safeguard against the pandemic, as promised recently, which in turn may help recede the fears.

Casting minds back to the previous risk aversion wave, we could know that the Fed Chair’s gloomy mood and downbeat economic forecasts by the US Federal Reserve officials poured cold water on the face of expectations of V-shaped recovery. Also supporting the bears were the US-China and the Beijing-Canberra tension. It should also be noted that upbeat prints of the US Producer Price Index (PPI) and Jobless Claims added strength to the US dollar.

Given the market’s risk-off mood, Wall Street marked the worst day since the early-March whereas the US 10-year Treasury yields slipped further below 0.70%. Even so, S&P 500 Futures seem to stabilize around 3,022 while flashing 0.30% gains by the press time.

Considering the lack of major data, the pair traders may have to keep eyes on the geopolitical headlines for fresh impulse. Recently, US Secretary of State Mike Pompeo criticized the Turkish court’s conviction of the US Consulate General employee. Elsewhere, North Korea alleged that the US is hell-bent on exacerbating tensions.

Technical analysis

In addition to an upward sloping trend line from May 18, currently around 0.6415, the 0.6400 threshold also challenges the pair sellers. Hence, the quote’s bounce to 0.6500 can be anticipated if markets consolidate further.


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