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NZD/USD slumps amid concerns over China’s economic recovery and strong US Dollar

  • NZD/USD slips below 0.6100 as China’s economy slows down.
  • US trade deficit shrunk in June, with Imports at a 1.5-year low. Trade Balance narrows to $-65.5 billion, slightly above the estimated $-65 billion.
  • NZD/USD traders eagerly await China’s upcoming inflation data, and US inflation data for July remains a key focal point.

NZD/USD slides sharply below the 0.6100 figure after data in China portrays a weak economic recovery after the country lifted its Covid-19 restrictions, sparking investor worries. Hence, traders braced for the safe-haven status of the US Dollar (USD), a headwind for the NZD/USD, which exchanges hands at 0.6051, down 1%, after hitting a daily high of 0.6109.

US Dollar safe-haven allure and poor Chinese economic data pressure the New Zealand Dollar below 0.6100

A subdued sentiment characterizes Tuesday’s session as global equities are slumping. Data in the Asian session showed that China, the second largest economy in the world, is struggling to gain traction, which turned the mood sour amongst investors. China’s Imports and Exports plunged below forecasts and June readings, pressuring the Government to provide additional stimulus.

The US economic docket showed the trade deficit shrinking in June, with Imports hitting a one-and-a-half-year low, as the US Commerce Department revealed. Exports came at $247.5 billion, below May’s $247 billion, while Imports dipped to $313 billion from $316.1 billion the prior’s month. Hence, the Trade Balance came at $-65.5, a tick higher than the $-65 billion estimated but below the previous reading of $-68.3 billion.

The NZD/USD reached a daily low after the US data release, while the US Dollar Index (DXY), a measure that tracks the buck’s performance against a basket of peers, advances 0.56%, at 102.650, weighing on the New Zealand Dollar’s (NZD) exchange rate.

Meanwhile, US Treasury bond yields are falling, as US central bank speakers shifted their tone toward a  neutral policy stance, except for Federal Reserve (Fed) Governor Michell Bowman, saying that more rate increases are needed.

An absent New Zealand (NZ) economic docket would leave NZD/USD traders leaning toward China’s inflation data. If China’s CPI extends its downtrend, that would portray further economic weakness, suggesting the NZD could weaken further. On the US front, the release of July inflation data is much awaited by market participants, with estimates remaining unchanged compared to last month’s data.

NZD/USD Price Analysis: Technical outlook

NZD/USD Daily chart

The NZD/USD turned bearish since falling below the daily Exponential Moving Averages (EMAs) and is approaching the June 8 low at 0.6031, which, once cleared, the pair might test the 0.6000 figure. A breach of the latter will expose the year-to-date (YTD) low of 0.5985. If NZD/USD surpasses that level, the next stop would be the November 10 daily low of 0.5840. On the flip side, if NZD/USD buyers keep the pair above 0.6000, the first resistance would be the 0.6100 figure, followed by the August 4 high of 0.6133.

NZD/USD

Overview
Today last price0.6047
Today Daily Change-0.0060
Today Daily Change %-0.98
Today daily open0.6107
 
Trends
Daily SMA200.621
Daily SMA500.6166
Daily SMA1000.6192
Daily SMA2000.6229
 
Levels
Previous Daily High0.6118
Previous Daily Low0.6084
Previous Weekly High0.6226
Previous Weekly Low0.606
Previous Monthly High0.6413
Previous Monthly Low0.612
Daily Fibonacci 38.2%0.6105
Daily Fibonacci 61.8%0.6097
Daily Pivot Point S10.6088
Daily Pivot Point S20.6069
Daily Pivot Point S30.6054
Daily Pivot Point R10.6122
Daily Pivot Point R20.6137
Daily Pivot Point R30.6156

Author

Christian Borjon Valencia

Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.

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