NZD/USD: Sellers aim for 0.6500 following downbeat China inflation figures

NZD/USD declines to 0.6510 after China flashed downbeat inflation data for May during Wednesday’s Asian session. The pair earlier refreshed the intraday high to 0.6519 but failed to defy the previous day’s weakness amid the pre-Fed cautious sentiment.

China’s Consumer Price Index (CPI) weakened more than 2.7% forecast to 2.4% on a yearly basis whereas the Producer Price Index (PPI) extended downside to -3.7%, below -3.3% market consensus. Additionally, the MoM readings of CPI drag it below -0.5% expected to -0.8%.

Read: China data dump unimpressive: May CPI +2.4 pct vs +2.7 pct YoY, PPI -3.7 PCT vs -3.3 PCT YoY

Considering the downbeat figures from the key customer, NZD/USD drops after the data. However, the pair’s weakness remains tepid amid the market’s inactivity ahead of the key US Federal Reserve monetary policy meeting decision.

It should also be noted that the market’s risk-tone sentiment also weighs down amid a minor noise between the US and China. While portraying the same, US Secretary of State Mike Pompeo alleged China of using coercion to push the UK towards opening the door for Huawei.

Against this backdrop, the US 10-year Treasury yields seesaw around 0.8300 while Japan’s Nikkei marks 0.10% losses to 23, 068 by the press time.

Looking forward, traders will keep waiting for the announcements from the Federal Open Market Committee (FOMC). However, the US inflation numbers for May and the US-China tussle might offer intermediate clues to the pair watchers. Analysts as Westpac also give high priority to the Fed meeting while saying, “the major event of the day will be the FOMC’s June monetary policy meeting. Having had great success buoying sentiment thus far, the Fed will keep rates on hold (4:00 am Thu Syd). Following the policy announcement, Chair Powell will deliver the post-meeting press conference (4:30 am). There will be considerable interest in the “dots” of FOMC members’ interest rate projections, which have not been published since December 2019 and on any discussion of measures such as yield curve control.”

Technical analysis

Buyers are looking for a clear break above 0.6580 level comprising the recent high and mid-January lows. If that happens, January 16 top surrounding 0.6665/70 could return to the charts. Meanwhile, overbought RSI conditions on the daily chart and the pair’s failure to rise beyond 0.6580 drags the kiwi pair towards March month high near 0.6450 during the further declines.