NZD/USD prints mild gains above 0.6600 ahead of China Caixin PMI

  • NZD/USD attempts recovery from 0.6623 after stepping back from seven-month high on Friday.
  • Bulls cheer US dollar weakness amid virus woes and uncertainty surrounding the American fiscal package.
  • Overseas data could offer intermediate moves but major attention will be on the virus headlines, American aid package news.

NZD/USD picks up the bids near 0.6640 amid the initial Asian session on Monday. The kiwi slipped from the highest since early-January on Friday as the US dollar registered across the board gains. However, the fundamental weakness in the greenback got magnified with the weekend headlines, which in turn renewed the quote’s buying.

Among the negatives, major ones were from the US Senate discussion over the much-awaited coronavirus (COVID-19) relief package. The American policymakers not only struggle to finalize the total sum of the aid plan but also failed to offer updates on the jobless claims benefit on its expiry. In the latest update, House Speaker Nancy Pelosi said US President Trump standing in way of enhanced unemployment benefits. On the other hand, US Treasury Secretary Steve Mnuchin mentioned during the ABC interview that we need to be careful about not piling on enormous debt for future generations.

Other than the disappointments over the US fiscal package, COVID-19 woes at New Zealand’s largest customer Australia also favors the risk-off mood. Recently, Victorian authorities declared a “state of disaster” and tightened lockdown measures for another six weeks. Conditions are also worrisome with the latest increase in pandemic numbers from China, another major trading partner of New Zealand.

Amid all these catalysts, market sentiment remains heavy with the S&P 500 Futures declining 0.15% to 3,258 by the press time.

While identifying the market risk, analysts at the Australia and New Zealand Banking Group (ANZ) said, “Amid very soft US data, abundant liquidity, the lack of progress containing COVID-19 and the Fed’s dovish tone, the USD rebound looks to be a temporary move and the rebound in equity prices points to a recovery in the NZD in coming days. The NZD faces the risks of easy policy too, with negative rates and foreign asset purchases still on the table, suggesting NZD/USD will underperform NZD crosses.”

On the other hand, Bloomberg also suggested the NZD/USD pair bulls remain cautious ahead of the key data. Their analysis depends upon the Hedge fund data while eyeing the RBNZ’s next move.

Read: Hedge funds raise bets Kiwi will fall as RBNZ decision looms – Bloomberg

Moving on, China’s Caixin Manufacturing PMI for July, expected 51.3 versus 51.2 prior, will be the key to watch ahead of the US PMIs from the Markit and the ISM. Although China’s data might keep the bulls hopeful, the broad market direction will take clues from the qualitative risk catalysts.

Technical analysis

The resistance-turned-support line stretched from June 10, currently around 0.6615, could restrict the pair’s near-term downside and direct the bulls towards 0.7000 psychological magnet.

 

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