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NZD/USD: On the back foot near 0.6400, 11-week low, ahead of China data

  • NZD/USD registers four-day losing streak.
  • Global producers, central banks raised concerns over coronavirus’s economic impact.
  • NZD’s proxy for China risk, coupled with upbeat US dollar performance, weighs on the pair.
  • This week’s RBNZ will be the key, China data and coronavirus headlines could offer intermediate moves.

NZD/USD pulls back from the intra-day low of 0.6401 to 0.6406 by the press time of early Asian session on Monday. Even so, the pair nears the lowest since November 25, 2019. Not only the New Zealand dollar’s close economic ties with China but broadly strong US dollar also play its role to drag the Kiwi pair amid coronavirus fears.

Recently updated figures concerning China’s coronavirus show that the death toll has already crossed SARS while breaching 900 mark with the number of infected people inside the dragon nation rising beyond 37,000 by the end of February 09.

In addition to the human impact of the deadly epidemic but economic alarms ranged by the global producers like Hyundai and central bankers like the RBA, the BOJ and the Fed keep the risk-tone heavy.

Noting this, analysts at the Australia and New Zealand Banking Group (ANZ) said, “disruption in the Chinese economy is already impacting our exports (tourism, education, meat and forestry, to name a few), and this will likely cause a sharp near-term dent to GDP growth.” As a result, the ANZ also downgraded its GDP forecast for the first half of 2020 to 0.8% from 1.3% predicted earlier.

On the contrary, the US fundamentals remain strong, as portrayed by the last week’s PMIs and employment data, whereas the greenback’s safe-haven allure also weigh on the pair.

While Wednesday’s monetary policy meeting of the RBNZ will be this week’s key event for the Kiwi traders, today’s China Consumer Price Index (CPI) and Producer Price Index (PPI) will also have its effects on the quote.

Even if the RBNZ isn’t expected to alter its monetary policy at this meeting, clues for coronavirus impact on the central bank’s future actions will be watched closely.

Regarding China data, January month numbers may be questioned based on the Lunar New Year holidays but still be watched for the partial impact of coronavirus. The headline CPI is expected to rise to 0.8% from 0.0% on MoM and 4.9% from 4.5% on YoY. The PPI may bounce back from -0.5% to +0.1% on YoY.

Technical Analysis

While 0.6450/55 can offer immediate upside barrier to the pair, the 200-day SMA level of 0.6500 will be the key resistance to watch if at all prices recovery. In the absence of any pullback, which is more likely, traders can take aim at November 2019 low near 0.6315.

 

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