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  • NZD/USD extends pullback from 0.6533 while keeping the previous day’s losses.
  • New Zealand Manufacturing Sales drop 1.7% in Q1 versus 2.7% prior.
  • Antipodeans bears the burden of the shift in trade sentiment ahead of the Fed.
  • China inflation data, Sino-American tussle might offer fresh impetus.

NZD/USD bounces off intraday low of 0.6496 to 0.6508 during the early Asian session on Wednesday. Even so, the pair stretches the previous day’s losses from a four-month high. While New Zealand’s first quarter (Q1) Manufacturing Sales offered direction moves to the pair, souring risk-tone sentiment seems to keep the downside pressure on the quote off-late.

New Zealand’s Manufacturing Sales marked -1.7% figures during Q1 2020 versus the previous increase of 2.7%. Though, the pair seems to pay a little heed to the second-tier data as traders await China’s May month Consumer Price Index (CPI) and Producer Price Index (PPI) data for further clues ahead of the key FOMC.

That said, the quote’s U-turn from multi-day high might have followed the broadly fading trade sentiment amid a lack of major data/events. Also weighing the Kiwi pair could the cautious sentiment before the US Federal Reserve’s monetary policy meeting and mild noise from China, Korea and Libya. Recently, US Secretary of State Mike Pompeo added to the market’s risk-off moves while alleging China’s Communist Party of using coercion against the UK’s move to bar Huawei. The Trump administration member cited Beijing’s threat to punish the British banks and break commitments to build nuclear power plants in the UK as backing points to the arguments.

While portraying the risk-tone, Wall Street and the US 10-year Treasury yields both marked losses on Tuesday. However, S&P 500 Futures seem to part ways by the press time as it prints 0.20% gains to 3,211.

Looking forward, China’s May month CPI data is expected to flash soft figures of 2.7% versus 3.3% prior on the YoY basis while likely recovering on the monthly basis to -0.5% from -0.9% previous readouts. Though the recent data from New Zealand’s key customer have been upbeat and hence traders remain mildly optimistic ahead of the outcomes.

In addition to China data, markets may keep eyes on the qualitative catalysts as well as broad risk sentiment for a short-term direction before the Fed meeting.

Technical analysis

Considering the overbought RSI conditions on the daily chart and the pair’s failure to rise beyond late-January lows, NZD/USD might witness further downside towards March month high near 0.6450. Though, the pair’s further declines could be restricted by a 200-day SMA level of 0.6320. Meanwhile, an upside clearance of 0.6580 resistance level can propel the quote towards January 16 top surrounding 0.6665/70.


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