NZD/USD remains on the defensive, just above mid-0.6300s after mixed Chinse macro data

The NZD/USD pair extends Friday's modest retracement slide from the 0.6410 area, or its highest level since February and kicks off the new week on a weaker note. Spot prices remain depressed for the second successive day and trade around mid-0.6300s, moving little in reaction to mixed Chinese macro data.

The National Bureau of Statistics of China reported that the economy expanded by 0.8% during the April-June quarter of 2023 as compared to the 0.5% rise anticipated. This, however, marks a notable slowdown from the 2.2% growth recorded in the first quarter. Moreover, the yearly growth rate also fell short of market expectations and came in at 6.3%, though was above the 4.5% increase in the previous quarter.

Separately, China's Industrial Production surprised to the upside and increased by 4.4% in June against estimates for a moderation to 2.7% from 3.5% in the previous month. This, however, was offset by the fact that China's Retail Sales decelerated sharply to the 3.1% YoY rate from 12.7% in May. The data does little to ease worries about an economic slowdown or provide any impetus to antipodean currencies, including the Kiwi.

The US Dollar (USD), on the other hand, draws some support from the upbeat University of Michigan (UoM) Consumer Confidence Index released on Friday, which, in turn, is seen acting as a headwind for the NZD/USD pair. That said, any meaningful USD recovery from its lowest level since April 2022 touched on Friday seems elusive in the wake of firming expectations that the Federal Reserve (Fed) will soon end its policy tightening cycle.

This makes it prudent to wait for strong follow-through selling before confirming that the NZD/USD pair has formed a near-term top and placing aggressive bearish bets. Market participants now look to the release of the Empire State Manufacturing Index from the US for some impetus later during the early North American session. In the meantime, a softer risk tone might continue to exert some pressure on the risk-sensitive New Zealand Dollar (NZD).

Technical levels to watch