- NZD/USD stays defensive around 1.5-month low, pares recent losses.
- China flashed upbeat prints of NBS Manufacturing PMI, Non-Manufacturing PMI for August; New Zealand’s ANZ sentiment numbers also improved.
- Market sentiment dwindles amid recession fears, hawkish Fed bets.
- US ADP Employment Change can direct intraday moves; NFP is the key.
NZD/USD prints mild gains as it takes rounds to 0.6135-30 after China’s upbeat PMIs for August, published during Wednesday’s Asian session. Also, firmer data from New Zealand’s (NZ) Australia and New Zealand Banking Group (ANZ) and cautious optimism in the market failed to impress buyers amid risks emanating from China, as well as from the US.
China’s headline NBS Manufacturing PMI rose to 49.4 in August versus 49.2 expected and 49.0 prior whereas the Non-Manufacturing PMI also grew to 52.6 during the stated month compared to 52.2 market forecasts and 53.8 previous readings.
At home, ANZ Activity Outlook improved to -4.0% versus -8.9% market forecasts and -8.7% prior whereas ANZ Business Confidence also rose to -47.8 from -55.0 expected and -56.7 prior.
Risk appetite remains sluggish, despite mildly positive S&P 500 Futures and the US 10-year Treasury yields. The reason could be linked to Taiwan’s firing of the warning shots for 1st time at a Chinese drone, per Reuters, as well as the Wall Street Journal’s news stating that the US Army grounds an entire fleet of Boeing-made Chinook helicopters. Also challenging the sentiment are the coronavirus fears as mainland China had confirmed 243,081 cases with symptoms as of August 30, per Reuters. The news also mentioned that China's capital Beijing and the financial hub of Shanghai reported one new local symptomatic case each while China's southern technology hub of Shenzhen reported 37 new locally transmitted COVID-19 infections on Tuesday, up from 35 a day earlier.
Above all, the recently cautious Reserve Bank of New Zealand (RBNZ) and the hawkish comments from the Fed policymakers exert downside pressure on the NZD/USD prices. Richmond Federal Reserve Bank President Thomas Barkin said, "I don't expect inflation to come down predictably." On the same line was Atlanta Fed President Raphael Bostic who said, “Slowing inflation data 'may give us reason' to slow interest rate hikes.” Recently, New York Fed President John Williams said, per the WSJ, “We are not at restrictive policy yet.” The policymaker also added, “We need to get interest rates higher than longer run a neutral level.”
Moving on, the US ADP Employment Change for August, the early signal for Friday’s US Nonfarm Payrolls (NFP), expected 200K versus 128K prior, will also be important to watch for fresh impulse.
Technical analysis
The NZD/USD pair’s pullback from the 10-DMA level surrounding 0.6185, as well as the bearish MACD signal, keep bears hopeful of revisiting the 0.6110-6100 support region comprising multiple lows marked since early July.