September 28, 2020

Struggles to defy second weekly loss around mid-0.6600s

  • NZD/USD pauses declines from 0.6709 but fails to recover past-0.6658.
  • New Zealand Business NZ PMI slipped below 66.8 forecast to 50.7, Food Price Index beat 0.2% market consensus to 0.7% in August.
  • Risk reset can’t ignore broad challenges to market sentiment.
  • US dollar strength favor the bears, eyes on the American CPI.

NZD/USD attempts recovery around 0.6650 during Friday’s Asian session. However, mixed set of data and heavy blocks to the market’s latest risk reset continues to challenge the bulls. The quote dropped during three of the last four days, including Thursday, which in turn highlights odds of printing a second weekly loss amid a light calendar left to watch.

New Zealand data stay mixed…

August month economics from New Zealand (NZ) fails to offer any fresh impulse to the market players. While the Business NZ PMI dropped past-66.8 forecast and 58.8 prior to 50.7, the Food Price Index rose beyond 0.2% expected to 0.7% MoM.

Considering the mixed data and the absence of major catalysts up for publishing, traders will keep eyes on the risk factors for immediate direction. The same has been weighing down the quote off-late.

Be it the US-China tension or the Brexit pessimism, not to forget the coronavirus (COVID-19) resurgence and dismal hopes of the US stimulus, everything contributes to the global risk-off mood. In doing so, Wall Street and the US treasury yields mark the south-run while the US dollar index (DXY) keeps gains.

It should be noted that the Reserve Bank of New Zealand’s (RBNZ) green signals to the prices run-up, like those from the European Central Bank (ECB), fails to keep the bulls happy as the US dollar extends recovery from 28-month low even as the American economics are yet to improve. As a result, any further strength in the US data and/or the passing of the stimulus bill, which was again rejected overnight, will be a boost to the greenback and can weigh on the kiwi pair.

For the time being, today’s US Consumer Price Index (CPI) for August, expected 1.2% YoY versus 1.0% prior, will be the key after the previous day’s recovery in the Producer Price Index (PPI) rekindled hopes of fundamental strength. Other than the economics, the risk catalysts will be the key to watch.

Technical analysis

Although 50-day SMA restricts the pair’s immediate downside around 0.6615, repeated failures to cross July month’s high near 0.6715 keeps the bears hopeful.

 

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