Forex Market: NZD/USD eases from a two-month high after China data hints at faltering lockdown recovery

NZD/USD eased from recent two-month peak on Monday, after the latest macro data set from China, a key trading partner to New Zealand, indicated a nascent recovery from strict pandemic-related lockdowns seemed to have faltered.

China’s industrial production, retail sales and fixed-asset investment data prints, reported earlier on Monday, all fell short of market consensus.

“Despite the warning of inflation risk and flush liquidity conditions, the dominant downside risks from the COVID spread and property-sector rout prompted the PBOC to cut rates to stimulate demand,” Ken Cheung, chief Asian Forex strategist at Mizuho Bank, was quoted as saying by Reuters.

Meanwhile, US import prices fell for the first time in seven months, data showed on Friday, after an earlier report revealed a slowdown in CPI inflation. This added to investor expectations of a less aggressive policy tightening by the Federal Reserve.

The Minutes of the Fed’s latest meeting, due to be released on Wednesday, will be closely watched by traders for further clues on policy makers’ view of macroeconomic situation.

“A growing narrative of a soft landing has taken hold, gaining traction after some easing in price indicators, with some interpreting that as allowing the Fed to ease up on the pace of hikes,” Tapas Strickland, a markets economist at National Australia Bank, wrote in an investor note.

Markets are now pricing a 44.5% chance of another 75 basis point Fed rate hike in September.

As of 8:46 GMT on Monday NZD/USD was retreating 0.98% to trade at 0.6384. Last Friday the major Forex pair went up as high as 0.6468, which has been its strongest level since June 8th (0.6492).

NZD/USD has risen 1.52% so far in August, following another 0.83% gain in July.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 0.6446
R1 – 0.6470
R2 – 0.6492
R3 – 0.6516
R4 – 0.6540

S1 – 0.6424
S2 – 0.6400
S3 – 0.6378
S4 – 0.6356