NZD/USD bounces off three-day low to entertain traders beyond 0.6500
- NZD/USD fails to extend the previous day’s losses below 0.6527.
- New Zealand’s Business NZ PMI jumped to the highest in 26 months to 56.3.
- Risk-tone struggles for clear direction amid a lack of major data/events.
- Virus updates, vaccine news and tussle between the US and China will be the key.
NZD/USD rises to 0.6540 amid the initial Asian session on Friday. The pair dropped for the third time in a week during the previous day before bouncing off 0.6527. However, a lower high from the top of 0.6601, flashed on July 09, keeps the sellers hopeful.
While risk reset and a lack of major catalysts could be considered as catalysts for the bear’s break around 0.6530, New Zealand’s June month Business NZ PMI could be considered as the help for the recent uptick. The private sentiment gauge surged past-35.6 forecast to 56.3, the highest since May 2018, as the pacific nation expands activities after returning from the coronavirus (COVID-19)-led lockdowns.
The kiwi pair’s losses on the previous day could be traced to the market’s risk-off mood amid increasing pandemic numbers and mixed economic data. The recent data from the US suggest that the pandemic has infected over 13.5 million globally with more than 3.5 infections in America. New Zealand’s headline Consumer Price Index (CPI) matched downbeat forecasts on Thursday and offered an extra reason to expect the Reserve Bank of New Zealand’s (RBNZ) rate cut.
In this regard, analysts at the Australia and New Zealand Banking Group (ANZ) say, “despite yesterday’s NZ Q2 CPI read coming in a smidgen stronger than we forecast (-0.5% q/q vs -0.6%), we got what we expected: A volatile read on quarterly inflation with evidence that there’s more volatility to come. Looking through the noise, there is also confirmation in these data that the underlying inflation pulse is weak. The elevated NZD, weak global inflation, record-low inflation expectations, and spare capacity opening up in the labor market mean the RBNZ has its work cut out. Without further action or a significant change in the economic outlook, the risk of persistent inflation undershoot is likely to materialize.”
Elsewhere, China’s data-dump, including GDP, Aussie employment data and the US statistics offered mixed clues and faded the hopes of global economic recovery. Also exerting downside pressure on the risk-tone sentiment was the Sino-American tension on expectations that the US will announce heavy sanctions on the key diplomats from Beijing.
As a result, the US equities and bond yields flashed downbeat figures whereas S&P 500 Futures mark 0.15% gains to 3,201 by the press time.
Moving on, a light calendar and fewer headlines could offer a dull trading day for the NZD/USD pair traders. Though, news concerning the pandemic and the US-China story will remain in the spotlight.
Technical analysis
A one-week-old descending trend line, near 0.6575, limits the pair’s immediate upside, a break of which could refresh the monthly top of 0.6601. Meanwhile, a joint of 21-day SMA and the weekly low, around 0.6500, is likely near-term strong support for the trades to watch.