NZD/USD sellers attack 0.6400 ahead of New Zealand, China data

NZD/USD takes the bids around 0.6422 amid the early Asian morning on Tuesday. The kiwi pair began the day’s trading with a downtick from 0.6427 to 0.6409. However, follow-on consolidation ahead of the key data offered the latest pullback moves.

The quote’s latest strength could be attributed to Reserve Bank of New Zealand's (RBNZ) chief economist Young Ha’s upbeat comments whereas the day-start fall might have taken clues from New Zealand (NZ) Finance Minister Grant Robertson’s worrisome. Even so, buyers and sellers continue to jostle amid mixed signals and keep the recent days’ range-bound trading ahead of New Zealand’s ANZ Business Confidence and Activity Outlook data for June, coupled with China’s NBS Manufacturing and Non-Manufacturing PMIs for the said month.

Markets struggle for clear direction…

Despite the resurgence of the coronavirus (COVID-19), which should ideally weigh on the trading sentiment and Antipodeans, the global risk gauges like Wall Street and the US 10-year Treasury yields flashed mixed signals the previous day. Upbeat US Pending Home Sales and Dallas Fed Manufacturing Business Index gained the applauds for pleasing the American share traders. On the other hand, the virus woes joined fresh worries concerning the Hong Kong issue and the Fed Chair Powell’s pessimistic statements to weigh on the bond yields.

Recently, the World Health Organization (WHO) Director-General Tedros Adhanom Ghebreyesus said that the pandemic is speeding up. Mr. Tedros earlier cited that the global death toll of near half a million to say that “the worst is yet to come”. It should also be noted that the figures from the US keep worrying about the markets while the strict lockdown in Anxin County of China renews fears of the Wuhan outbreak.

Elsewhere, the RBNZ Chief Economist Yuong Ha reiterated the March month’s monetary policy guidance suggesting no change in the Official Cash Rate (OCR) until March next year. Before that, NZ FinMin Robertson said, in the Bloomberg interview, that economy faces challenging quarters.

On the other hand, US Secretary of State Mike Pompeo announced the end of controlled defense exports to Hong Kong. Before that, the Federal Reserve Chairman Jerome Powell said that the outlook is "extraordinarily uncertain" and will depend both on containing the virus and on the government's efforts to support the recovery.

It should also be noted that the RBNZ Governor Adrian Orr welcomed a decline in retail interest rates, saying "now is not the time for credit crunch to develop", the previous day. Additionally, Prime Minister (PM) Jacinda Ardern said that opening up the borders due to the pandemic is untenable.

Looking forward, traders will keep eyes on the economic calendar for immediate direction. However, this doesn’t degrade the importance of virus, trade and geopolitical headlines to move the markets.

Forecasts suggest, China’s NBS Manufacturing PMI to recede from 50.6 to 50.4. The weakness in headlines activity numbers from the key customer might weigh on the pair. Further, any more weakness in the ANZ Business Confidence and Activity Outlook from the previous readings of -41.8 and -38.7% respectively could drag the quote towards the south.

Technical analysis

Monday’s Doji candlestick formation above 21-day EMA suggests the pair’s recovery momentum towards 0.6450 immediate resistance. However, a downward sloping trend line from June 10, at 0.6506 now, could restrict the pair’s further upside. Alternatively, a downside break below 0.6400 EMA support could aim for 0.6380 to validate fresh weakness in direction to 200-day EMA around 0.6325.