NZD/USD ignores New Zealand trade numbers below 0.6100 with eyes on US NFP

  • NZD/USD defends Friday night’s corrective pullback from the seven-week low despite the bearish data.
  • New Zealand’s second quarter terms of trade index fell to -2.4% vs -1.3% expected.
  • Concerns from China, high yields put downward pressure on a light domestic calendar.
  • The US NFP will be key as DXY discounted the 20-year high ahead of the release.

NZD/USD maintains the corrective rebound from the 1.5-month low near 0.6080 despite bearish trade data from New Zealand (NZ) early Friday in Asia. In doing so, the Kiwi pair is depicting consolidation ahead of the major US Nonfarm Payrolls (NFPs) while breaking a three-day downtrend.

According to the latest trade figures from Statistics New Zealand, the terms of trade fell 2.4% in the second quarter (Q2), Reuters reported. The details mention that export prices increased by 3.7%, while imports increased by 6.5%. Economists had expected the index to post a 1.3% decline, with export prices up 0.8% and imports up 2.5%, according to a Reuters poll.

Although the quote remains blind to data while rounding to 0.6080, it remains near seven-week lows as markets love the US dollar amid widespread pessimism and hawkish Fed bets. Additionally, bitter sentiment surrounding the world’s largest user of commodities, China, is putting further downward pressure on NZD/USD prices.

A covid-led lockdown in the Chinese city of Chengdu joins Caixin Manufacturing’s pessimistic PMI in painting grim conditions in the world’s second-largest economy. On the same line could be the escalation of geopolitical tensions between Beijing and Washington, via Taiwan.

On the other hand, the hawkish Fedspeak and firmer US data support the demand for US dollars. That said, Atlanta Fed President Raphael Bostic said the Fed has work to do with inflation, a “long way” from 2%. In addition, new Dallas Fed President Lory Logan joined the ranks of other hawkish US central bankers in declaring, “Restoring price stability is the No. 1 priority.”

The US ISM manufacturing PMI reprinted the August figure of 52.8 against market expectations of 52.0. Additionally, the final reading of the S&P Manufacturing PMI for August exceeded initial estimates of 51.3 to 51.5, from 52.2 ahead of July’s final. On the same line, initial jobless claims in the United States fell to 232,000 from an expected 248,000 and 237,000 previously. Additionally, unit labor cost rose 10.2% QoQ during the second quarter (Q2) vs. 10.7% expected, while labor productivity fell 4.1%. % in Q2 vs. forecast declines of 4.5% and -4.6% previously.

Against this backdrop, Wall Street closed weakly but yields on 10-year US Treasury bonds reached their highest levels since the end of June. More importantly, the 02-year-old counterpart jumped to the 15-year-old high. It’s worth noting that the CME’s FedWatch tool is signaling a 72% chance of a 75 basis point Fed rate hike in September versus nearly 69% previously.

Also Read: Nonfarm Payrolls Overview: Five Reasons to Expect a Win-Win for the Dollar

Technical analysis

Unless it bounces off the August 22 low around 0.6155, NZD/USD remains vulnerable to a refresh from the yearly low, currently around 0.6060. In doing so, the psychological magnet of 0.6000 and a descending trend line from late January near 0.5900 will be in focus.

About Chris McCarter

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