NZD/USD remains depressed near one-week low, moves little after Chinese inflation figures

The NZD/USD pair trades with a negative bias for the third successive day on Friday and touches a fresh weekly low, around the 0.5920-0.5915 region during the Asian session. Spot prices remain on the defensive following the release of Chinese inflation figures and seem vulnerable to prolonging the recent sharp retracement slide from the 0.6055 area or over a two-month peak touched on Wednesday.

The National Bureau of Statistics of China reported that the headline Consumer Price Index (CPI) rose 0.2% MoM in September and the yearly rate was flat, both missing market expectations. Furthermore, China’s Producer Price Index (PPI) fell by 2.5% over the past 12 months to September, though was less worse than consensus estimates for a 4.2% decline and the 3.0% fall registered in the previous month. The mixed data, however, does little to ease concerns about the worsening economic conditions in China, which continues to undermine antipodean currencies, including the New Zealand Dollar (NZD).

The US Dollar (USD), on the other hand, struggles to capitalize on the previous day's solid recovery from over a two-week low in the wake of a modest pullback in the US Treasury bond yields. This, however, fails to attract any buyers around the NZD/USD pair, tough might help limit deeper losses. The recent dovish remarks by several Federal Reserve (Fed) officials suggested that the US central bank is nearing the end of its rate-hiking cycle. This, in turn, keeps a lid on the US bond yields and keeps the USD bulls on the defensive, though the downside remains cushioned amid reviving Fed rate hike bets.

The latest US consumer inflation figures released on Thursday showed that both the headline and Core CPI remained above the Fed's 2% target. This supports prospects for further policy tightening by the Fed and leaves the door open for at least one more rate hike by the end of this year. This should act as a tailwind for the US bond yields and the USD, suggesting that the path of least resistance for the NZD/SUD pair is to the downside. Traders now look to Philadelphia Fed President Patrick Harker's speech, which, along with the Preliminary Michigan Consumer Sentiment Index, will drive the USD demand.

Technical levels to watch