NZD/USD edges up after Chinese PMI, remains below two-week high set on Wednesday
- NZD/USD regains positive traction following the release of a slightly better Chinese PMI.
- Worries about slowing economic growth in China and geopolitical risk to cap the Kiwi.
- The USD remains supported by the Fed’s less dovish outlook and acts as a headwind.
The NZD/USD pair attracts some buyers during the Asian session on Thursday and for now, seems to have stalled the previous day's retracement slide from the 0.6175 region, or over a two-week peak. Spot prices currently trade around the 0.6130-0.6135 zone, though the lack of follow-through buying warrants some caution before positioning for any further appreciating move.
A private-sector survey released earlier today showed that China's factory activity expanded at a steady pace for the third straight month in January. In fact, China's Caixin Manufacturing PMI came in at 50.8 in January, matching the previous month's reading and beating market expectations for a downtick to 50.6. This, in turn, provides a modest lift to antipodean currencies, including the Kiwi, which, along with subdued US Dollar (USD) price action, acts as a tailwind for the NZD/USD pair.
The optimism, however, is likely to remain limited in the wake of a tepid economic recovery in China. Furthermore, the Federal Reserve’s (Fed) less dovish outlook on Wednesday, pushing back against market expectations for a March rate cut, assists the USD to stand tall near its highest level since December 13. Apart from this, geopolitical risks should benefit the Greenback's relative safe-haven status and further contribute to keeping a lid on any further upside for the NZD/USD pair.
Traders now look to the US economic docket, featuring the release of the usual Weekly Initial Jobless Claims data and the ISM Manufacturing PMI. This, along with the broader risk sentiment, might influence the USD price dynamics and provide some impetus to the NZD/USD pair. The focus, however, will remain glued to the closely-watched US monthly employment details, popularly known as the Nonfarm Payrolls (NFP) report on Friday.
Technical levels to watch