NZD/USD: China Caixin Manufacturing PMI probes bulls around 0.6300

NZD/USD struggles to extend the day-start run-up after China flashed softer private activity numbers for July during Monday’s Asian session. Also weighing on the Kiwi pair is the market’s sour sentiment and cautious mood ahead of the key data from New Zealand and the US. Even so, the quote remains firmer around 0.6295 while being the biggest gainer among the G10 currency pairs by the press time.

That said, China’s Caixin Manufacturing PMI for July eased to 50.4 versus 51.5 expected and 51.7 prior. In doing so, the private activity gauge from China tracked the official PMIs, published during the weekend. It’s worth noting that China’s NBS Manufacturing PMI dropped back into contraction after the previous monthly improvement, down to 49.0 versus 50.4 expected and 50.2 prior. Further, the Non-Manufacturing PMI rose past 52.3 market forecast to 53.8, against 54.7 in previous readouts.

Earlier in the day, New Zealand’s seasonally adjusted Building Permits dropped 2.3% for June versus -0.3% market forecast and -0.5% prior readings.

It should be observed that hawkish concerns surrounding the Reserve Bank of New Zealand’s (RBNZ) rate hike trajectory and the US dollar’s latest weakness, amid “technical recession” and downbeat comments from Fed Chair Jerome Powell, seem to have favored NZD/USD bulls. On the same line could be the comments from global rating agency Fitch suggesting more stimulus from China. “China to roll out financial tools to boost infrastructure investment,” said Fitch.

On a different page, China’s warning to the US administration over House Speaker Nancy Pelosi’s visit to Taiwan, as well as fears that Beijing’s stimulus won’t be enough to renew economic recovery, appeared to have weighed on the AUD/USD prices. Further, comments from Minneapolis Fed President Neil Kashkari and the Fed’s preferred inflation gauge appeared to have probed the greenback bears of late. “The fed is still a long way away from backing off rate hikes,” said Fed’s Kashkari to the New York Times (NYT). The policymaker added, “Hiking rates by half a point at coming Fed meetings seems reasonable to me.” Furthermore, the US Core Personal Consumption Expenditures (PCE) Price Index, the Fed's preferred gauge of inflation, rose to 4.8% YoY for June versus 4.7% prior.

Against this backdrop, the S&P 500 Futures print mild losses but the US Treasury yields consolidate a recent fall around 2.66%, up two basis points (bps), to portray the sour sentiment and underpin the US dollar’s rebound.

Having witnessed a minor reaction to China’s PMIs and risk-aversion wave, NZD/USD traders will keep their eyes on the US ISM Manufacturing PMI for July, expected at 52 versus 53 prior, for intraday directions. However, major attention will be given to Wednesday’s New Zealand jobs report and Friday’s US Nonfarm Payrolls (NFP).

Technical analysis

Although a clear upside break of the downward sloping resistance line from late April, now support around 0.6260, and keeps buyers hopeful, the 50-DMA level of 0.6305 tests the upside momentum of late.