- NZD/USD struggles to extend the previous day’s recovery gains above 0.6000.
- Business NZ PMI drops to the record low during April.
- Risks remain heavy amid trade/virus fears, US dollar keeps the gains.
- China Industrial Production, Retail Sales can offer immediate direction.
Following its initial drop to 0.6000, NZD/USD probes intraday high of 0.6010, amid the early Asian session on Friday. The kiwi pair recently reacted to the downbeat New Zealand Business NZ PMI data for April. Also exerting downside pressure on the quote could be the broad US dollar strength hand the risk aversion wave.
Business NZ PMI slips below 50.6 forecasts and 53.2 previous to the record low of 26.1 in April. The business sentiment gauge slipped to 36.1 during the year 2008.
The US dollar remains bid as Fed policymakers, Dallas Fed President Robert Kaplan being the latest, keeps trying to rule out the negative interest rates.
Also favoring the greenback could be hopes of the additional stimulus, as cited by Senate Majority Leader McConnell as well as Fed’s Kaplan. However, nothing could be more important than US President Donald Trump’s surprise favor for the strong dollar on Thursday, which offered the broad greenback gains.
As far as the risks are concerned, US policymakers keep trying to hurt China in one way or the other. The latest attack comes from the Senate where the administration is empowered to levy sanctions on Chinese officials involved in the Xinjiang case. It should be noted that a Republican bill is still pending in the Senate that will enable President Trump to sanction China if it doesn’t cooperate in virus outbreak investigation.
While portraying the risks, S&P 500 Futures drop 0.13% to 2,844 whereas US 10-year treasury yields remain on the back foot near 0.62%.
One should know that downbeat economic and deficit forecasts in the annual New Zealand Budget, as well as RBNZ’s QE expansion, weighed on the kiwi pair during the previous two days.
Looking forward, China’s April month Industrial Production may recover from -1.1% to +1.5% whereas Retail Sales are expected to flash -7.0% contraction versus -15.8% prior. Given the likely recovery in the data from one of the largest customers, NZD/USD may benefit post data if outcomes match the market consensus. Though, broad US dollar strength and risk aversion may cap the rise.
Technical analysis
The pair’s U-turn from a six-week-old support line, near 0.5980 now, increases the odds to confront a 21-day SMA level close to 0.6040/45. Though, 0.6100 could stop buyers afterward. Meanwhile, April 23 low near 0.5910 can please the bears below 0.5980.
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