- NZD/USD softens to near 0.5895 in Tuesday’s Asian session.
- China’s Retail sales grew 0.6% YoY in July; Industrial production expanded 4.5% YoY during the same period.
- Expectations of a US interest rate hike next month eased.
The NZD/USD pair declines to around 0.5895 during the Asian trading hours on Tuesday. Weaker-than-expected Chinese Retail Sales and Industrial Production data weigh on the China-proxy New Zealand Dollar (NZD) against the US Dollar (USD).
China’s Retail Sales arrived at a 0.6% growth from a year earlier, according to the National Bureau of Statistics on Monday. This figure came in worse than the estimated 1.5% and slowed from the 1.0% growth in June. Additionally, Industrial Production rose 4.5% YoY in July, versus 5.3%, falling for the first time in three months and missing expectations.
Statistics Bureau spokesperson Fu Linghui said that geopolitical pressure abroad and high temperatures domestically impacted China’s economy last month. The report indicated China’s economy lost momentum across the board in July, which dragged the Kiwi lower as China is a major trading partner of New Zealand.
However, lower bets for a US Federal Reserve (Fed) rate hike could undermine the Greenback and act as a tailwind for the pair. Markets are now pricing in a September quarter-point hike, flipped to a near-65% chance of a hold, after softer consumer price inflation and weaker retail sales.
Kiwi support tempered as RBNZ seen pausing after July hike
Commerzbank’s Volkmar Baur notes that “in about two weeks, the Reserve Bank of New Zealand will hold its next monetary policy meeting,” and, based on the softer inflation indicators released this morning, “it seems unlikely that it will raise interest rates for a second consecutive time following the July hike.” While the latest data argue for a pause after July’s move, Baur expects the RBNZ to retain a hawkish tone given ongoing Middle East risks, which should offer some near-term support to the Kiwi even as a weak domestic economy weighs on the longer-term outlook.
Technical Analysis: NZD/USD
In the daily chart, NZD/USD holds a constructive bullish bias as spot remains above both the 100-day moving average and the Bollinger middle band. The pair is approaching the Bollinger upper band, which caps the immediate topside, while the Relative Strength Index (14) around 61 sits in bullish but not overbought territory, suggesting that buying pressure persists yet may slow as price nears overhead supply.
On the downside, initial support is offered by the Bollinger middle band at 0.5855, reinforced by the 100-day moving average at 0.5830 slightly lower, with the Bollinger lower band near 0.5765 acting as a deeper cushion in case of a broader pullback.
On the topside, a clear break above the Bollinger upper band at 0.5945 would open the door for an extension of the recovery, while failure to overcome this barrier would likely trigger consolidation or a corrective dip toward the aforementioned support cluster.
