NZD/USD stabilizes around 0.6300 ahead of China inflation data

• NZD/USD sellers catch a breath amid a lack of fresh clues, before key China data.
• US-China trade optimism fades with the dragon nation’s need for more talks.
• NZ Q3 CPI becomes the major driver of the week.

Despite no fresh clues that restore the confidence of the US-China trade watchers, NZD/USD retraces to 0.6300 amid very early Tuesday morning in Asia.

The Kiwi pair lost recovery strength on Monday as Chinese diplomats asked for more talks before signing a trade deal with the United States (US). Markets were earlier cheering the “Phase One” deal between the world’s two largest economies and hence got a reason to be careful. The same poured cold water on surprisingly upbeat statements by China’s Global Times’ Editor-In-Chief Hu Xijin.

While no clear scheduled is available for further talks between the US and China after both the global powers agreed for initial trade truce, investors will be keeping an eye over the headlines for fresh impulse.

For the immediate direction, China’s September month Consumer Price Index (CPI) and Producer Price Index (PPI) will be the key to watch. Forecasts suggest CPI remains static at 0.7% on MoM basis while rising to 2.9% from 2.8% on YoY format. Further, PPI might deteriorate further to -1.2% from -0.8% on a Year-on-Year basis.

It should be noted that New Zealand’s (NZ) third quarter (Q3) CPI data, up for release on Wednesday, becomes crucial for the Kiwi traders as it can help predict the Reserve Bank of New Zealand’s (RBNZ) next rate action. The headlines inflation gauge is expected to soften on YoY basis, to 1.4% from 1.7%, and can keep firming odds of another rate cut from the RBNZ.

Technical Analysis

While 0.6350/55 limits the pair’s immediate upside, 50-day Exponential Moving Average (EMA) level of 0.6371 holds the keys to the quote’s rise towards 0.6400 round-figure. Alternatively, 0.6276/70 support-zone including lows marked on September 03, October 10 and October-start highs can keep the pair’s short-term declines restricted before highlighting 0.6250 and 0.6200 rest-points.