NZD/USD stays below 21-DMA amid lack of fresh trade-positives, challenges to dairy giant

• NZD/USD buyers lack the support of trade-positive news off-late.
• Negative announcements concerning Fonterra portray challenges to the dairy industry.
• US NFP, Fed Chair Powell’s speech and trade/political headlines are in the spotlight amid a light economic calendar in Asia.

Despite rising to a week’s high during the previous day, NZD/USD steps back from extending the recovery as it trades near 0.6370 at the start of Friday’s Asian session.

Renewed US-China trade optimism has helped the Kiwi pair extend its run-up on Thursday after the Chinese Commerce Ministry confirmed a call with the US diplomats to have a trade talk in October while also keeping consultations on for a good result during mid-September.

However, latest comments from China’s Ambassador to Australia, fail to portray any change in outlook the dragon nation’s representatives have towards the US. In his writing to the Australian press, Mr. Cheng Jingye said that “In the face of US trade bullying and extreme pressure, China’s position has always been rational and clear-cut. We do not want a trade war, but are not afraid of fighting one.” The news pushes the Antipodeans traders to rethink on their optimism surrounding the US-China trade relations.

Adding to the Kiwi buyers worries were challenges to the global dairy giant Fonterra. The company recently confirmed a loss of $590-$675 million for FY19, which is a 37 to 42 cent loss per share. Earlier, Reuters ran a story claiming the company scrapped bonuses and frozen the pay of about 7,000 employees. The company cited challenges to industry and hurdles in Australia as a part of their reasons for the present losses. Dairy is the main earning source of New Zealand and hence and the challenges to Fonterra turns negative for the Kiwi.

With no major data up for publishing on the Asian economic calendar, investors will keep seeking clues from trade/political headlines ahead of the key US Nonfarm Payrolls (NFP) and a speech from the US Federal Reserve Chairman Jerome Powell. While NFP is likely to portray the recent upbeat signal from private data, ADP Employment Change, Powell’s speech in Zurich will be the last before he enters the blackout period for Fed policymakers ahead of the mid-month Fed meeting.

Technical Analysis

The area comprising 21-day simple moving average (DMA) and 23.6% Fibonacci retracement of late-July high to Tuesday’s low, around 0.6388/92, acts as near-term key upside barrier for the pair as it holds the key to its run-up towards 0.6400 and then to 38.2% and 50% Fibonacci retracement levels near 0.6470 and 0.6530. On the contrary, 0.6340 and 0.6300 are likely immediate supports to watch during further pullback.