NZD/USD steadies below 0.6300 on mixed second-tier NZ data, focus on US inflation

• NZD/USD remains sidelined after rising the most in three weeks the previous day.
• New Zealand Electronic Card Retail Sales improved MoM, dropped on YoY during July.
• Softer US Treasury yields weighed DXY, China trade numbers favored Antipodeans.
• Kiwi bears ignored softer prints of Q3 RBNZ Inflation Expectations with eyes on US CPI for July.

NZD/USD bulls struggle amid mixed retail sales data at home and an absence of major catalysts after rising the most in three weeks the previous day. That said, the Kiwi pair seesaws around 0.6280-85 during the initial hour of Tuesday’s Asian session.

New Zealand Electronic Card Retail Sales for July rose to -0.2% MoM versus -1.3% market forecasts and downwardly revised 0.0% prior. The yearly figure slumped to -0.5% versus 6.9% expected and 1.9% prior.

It’s worth noting that the Reserve Bank of New Zealand’s (RBNZ) third quarter (Q3) Inflation Expectations eased to 3.07% versus 3.29% prior.

Even so, the Kiwi pair began the key week comprising the US inflation on a front foot amid a softer US dollar and hopes of economic recovery from China.

That said, US Dollar Index (DXY) traced Treasury yields to consolidate Friday’s heavy gains that offered the greenback gauge the first weekly positive in three. That said, the DXY registered a 0.19% daily loss to 106.37 by the end of Monday whereas the US 10-year Treasury yields dropped nearly seven basis points (bps) to 2.75% at the latest, following a 14-bps run-up the previous day.

On the other hand, optimism surrounding China could be witnessed in the July month trade numbers from the dragon nation and the market’s lack of interest in the Sino-American tussles over Taiwan. The dragon nation continues its military drills near the Taiwan border but the US recently signaled no major escalation in the geopolitical risks likely from Beijing. Elsewhere, China’s trade numbers for July. The headline Trade Balance rose to $101.26B versus $90B forecasts and $97.94B. Further details suggest that Exports increased by 18% compared to 15% expected and 17.9% prior whereas the Imports eased to 2.3% compared to 3.7% expected and 1.0% prior.

During these plays, Wall Street began Monday’s trading on a firmer footing before closing mixed, which should have challenged the NZD/USD buyers amid hawkish Fed bets.

Given the recently cautious mood in the market, the Kiwi pair may remain sidelined and can witness a pullback should the scheduled second-tier US job numbers print strong outcomes. Forecasts suggest that the second quarter (Q2) US Nonfarm Productivity could improve to -4.6% from -7.3% prior while Unit Labor Costs may ease to 9.5% during the stated period versus 12.6% in previous readings. Furthermore, headlines surrounding Taiwan and Russia will also be important for clear directions.

Technical analysis

Although 20-DMA puts a floor under the short-term NZD/USD downside around 0.6240, a downward sloping resistance line from June 16, close to 0.6335-40 challenges the pair buyers.