NZD/USD slides below 0.6100 on downbeat China PMI, sour sentiment, US NFP eyed

• NZD/USD drops to the fresh seven-week low during a three-day downtrend.
• China’s Caixin Manufacturing PMI traces official activity numbers to mark contraction for August.
• Aggressive Fed policymakers, China-linked economic fears and Eurozone energy crisis also add to the risk-off mood.
• US ISM Manufacturing PMI may entertain intraday traders but NFP is the key.

NZD/USD renews 1.5-month low after China’s activity numbers join broad risk-off mood to weigh on the Kiwi pair during Thursday’s Asian session. However, the cautious mood ahead of the top-tier US data tries to limit the downside, but eventually fails of late. That said, the pair pints 0.33% intraday loss during a three-day downtrend to 0.6090, at 0.6100 by the press time.

China’s Caixin Manufacturing PMI marked the lowest prints in three months while suggesting a contraction in activities with a 49.5 figure, versus 50.2 expected and 50.4 prior. In doing so, the private manufacturing gauge tracks the official NBS PMI and highlights grim conditions at the world’s largest industrial player.

Additionally, covid-led lockdowns in China and the escalating tussles with Taiwan also portray the dragon nation-linked risk-aversion. Recently, Taiwan's President Tsai Ing-Wen mentioned that Taiwan wants to expand its semiconductor industry collaboration with the US.

Alternatively, China will publish detailed steps for a set of newly-announced policy measures in early September, state media quoted the cabinet as saying on Wednesday, reported Reuters. The news also stated that China will guide commercial banks to provide medium- and long-term loans to key projects and equipment upgrading, the cabinet was quoted as saying.

On a broader front, strong US Treasury yields and central bankers’ aggression despite softer data appear to weigh on the NZD/USD prices. That said, the US 10-year Treasury yields refresh a two-month high of around 3.21% while the two-year bond coupons jump to the highest levels since 2007, near 3.51% at the latest. Also portraying the sour sentiment is the S&P 500 Futures’ 0.55% intraday fall to the lowest levels since late July, at 3,930 by the press time.

US ADP Employment Change rose by 132K versus 288K expected and 270K prior. However, the average wage increases in the US in August were 7.6% y/y and the same kept the Fed policymakers hawkish. Following the data, Cleveland Federal Reserve Bank President Loretta Mester said on Tuesday that she was not anticipating the Fed to cut rates next year, as reported by Reuters. Further, the newly appointed Dallas Fed President Lory Logan joined the lines of hawkish fellow US central bankers while saying, “Restoring price stability is No. 1 priority.”

Moving on, hopes of upbeat details of the Chinese stimulus and the US ISM Manufacturing PMI for August, expected 52.8 versus 52.0 prior, could entertain the NZD/USD traders ahead of Friday’s US Nonfarm Payrolls (NFP). It should be noted that the risk-off mood keeps bears hopeful.

Technical analysis

A three-week-old falling wedge’s bottom and the yearly low marked in July, respectively around 0.6065 and 0.6060, could test the NZD/USD bears. Alternatively, an upside break of the 0.6145 hurdle will confirm the bullish chart pattern but the NZD/USD buyers will need validation from the 50-SMA level surrounding 0.6170.