NZD/USD edges lower past 0.6500 with eyes on China PMI, US CB Consumer Confidence

NZD/USD holds its place on the bear’s radar, after confirming the seat on the previous day, as the Kiwi pair traders remain cautious ahead of the key data/events. That said, the quote seesaws near 0.6470 following the downbeat start to the crucial week comprising the US Federal Reserve’s (Fed) monetary policy meeting, as well as New Zealand’s (NZ) quarterly employment data. It should be noted that China’s officials NBS Manufacturing PMI and Non-Manufacturing PMI could offer immediate directions to the pair traders.

The major currency pair failed to cheer the return of Chinese traders after a one-week-long Lunar New Year (LNY) holiday as market sentiment worsened ahead of the top-tier data/events. Adding strength to the risk-off mood could be the cautious risk profile before the equity heavyweights like Amazon, Alphabet, Apple and Metal release their quarterly earnings. It should be noted that mixed NZ trade numbers also offered a reason for the Kiwi pair traders to probe the previous three-week uptrend.

On Monday, New Zealand’s headline Trade Balance improved to $-475M MoM for December versus $-2,108M prior while the yearly figure rose to $-14.46B compared to $-14.98B previous readings. Further details suggest that the Imports eased to $7.19B compared to $8.52B whereas the Exports increased to $6.72B for December compared to $6.34B prior.

That said, the US 10-year Treasury bond yields rose 2.4 basis points (bps) to 3.542% while Wall Street benchmarks closed in the red as market players rushed to risk safety ahead of the key front-line catalyst. Also challenging the sentiment could be the mixed headlines over China’s capacity to justify the latest optimism surrounding the world’s biggest commodity user even if it signals upbeat holiday spending and nearness to the current Covid wave.

Given the mixed mood and a light calendar at home, the NZD/USD price may remain depressed ahead of China’s NBS Manufacturing PMI and Non-Manufacturing PMIs for January. Forecasts suggest that the former is likely to remain below 50, close to 49.7, despite improving from 47.0 prior while the latter could regain above 50 level of 51.0 after slumping to 41.6 the previous month. It should be noted that the above 50 prints describe the activity increase while the below 50 numbers hint at a contraction in the activities. Other than the China PMI, Australia’s Retail Sales for December could also entertain NZD/USD traders ahead of the US Conference Board Consumer Confidence gauge for January. Also important will be the fourth quarter (Q4) Employment Cost Index (ECI).

Technical analysis

A sustained daily closing below the three-week-old support line, now resistance around 0.6520, directs NZD/USD price towards the 21-DMA level of 0.6405.