NZD/USD clings to small daily gains above 0.6250 after erasing bearish gap
|- China's Caixin Manufacturing PMI drops to record low in February.
- US Dollar Index slumps to monthly lows near 97.50.
- US 10-year Treasury bond yield erases more than 9% on Monday.
The NZD/USD pair opened the week with a bearish gap and slumped to its lowest level since May 2009 at 0.6192 during the Asian trading hours. However, with the USD coming under strong selling pressure ahead of the American session, the pair staged a rebound and erased its gap. As of writing, the pair was up 0.12% on the day at 0.6258.
The data from China showed that the Caixin Manufacturing PMI plummetted to an all-time low of 40.3 in February from 51.1 in January to reflect the impact of the coronavirus outbreak on the economy. Additionally, this reading missed the market expectation of 45.7 by a wide margin. On the other hand, the Terms of Trade Index for the fourth quarter in New Zealand improved to 2.6% from 1.9% but failed to help the kiwi find demand.
USD weakens on falling T-bond yields
On the other hand, with the flight-to-safety taking control of financial markets during the European trading hours, the US Treasury bond yields fell sharply and weighed on the greenback. While the 10-year reference was erasing more than 9% on a daily basis, the US Dollar Index was at its lowest level since early February at 97.51, down 0.62% on the day.
In the second half of the day, Markit Manufacturing PMI (final) and ISM Manufacturing PMI from the US will be looked upon for fresh impetus. However, developments surrounding the coronavirus outbreak and their impact on the financial markets are likely to continue to remain in the limelight.
During the Asian trading hours on Tuesday, the Reserve Bank of Australia will announce its monetary policy decisions and a significant reaction in the AUD/USD pair could provide a directional clue to the positively correlated NZD/USD pair as well.
Technical levels to watch for
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