NZD/USD pares post-NFP losses around 0.6600 with eyes on China open

• NZD/USD offers no major change to begin week’s trading, dropped heavily on Friday.
• US jobs report for January propelled yields, USD rebound the previous day.
• Escalating geopolitical tensions also exert downside pressure on Antipodeans.
• China’s return after a week-long Lunar New Year will be important to watch, Caixin Services PMI to decorate calendar.

NZD/USD defends 0.6600 while portraying a corrective pullback from a one-week low after Friday’s heavy sell-off. That said, the Kiwi pair seesaws around 0.6615 by the press time of early Monday morning in Asia.

The quote rose the most on a weekly basis since late December amid broad US dollar weakness. However, Friday’s US jobs report triggered the greenback’s rebound.

On Friday, the US Bureau of Labor Statistics (BLS) offered a positive surprise to the US dollar bulls with January’s employment report. The headline Nonfarm Payrolls (NFP) rose by 467K versus the median forecast for a 150K rise and 510K revised prior while the Unemployment Rate rose to 4.0% from 3.9% in December, compared to expectations for a no-change figure. It’s worth noting, however, that the U6 Underemployment Rate extended the south-run to 7.1% from 7.3% previous readouts. Also encouraging was Average Hourly Earnings that jumped strongly to 5.7% versus 4.9%. 

Additionally, hawkish comments from Fed policymakers join Russia-linked fears to challenge the NZD/USD buyers even as the US dollar weakness kept the pair on the front foot before Friday. Recently, US national security adviser said that the Russian invasion of Ukraine could be any day now.

Amid these plays, the US Dollar Index (DXY) dropped the most since early November 2021 before snapping a five-day downturn to bounce off a three-week low the previous day. Further, the US 10-year Treasury yields rallied to the fresh high since January 2020, with the latest addition being 8.9 basis points (bps) to 1.916%. It should be noted, however, that equities were surprisingly mixed.

Looking forward, China Caixin Services PMI for January, expected 52.9 versus 53.1 prior, will be important to watch for short-term direction. It should be observed that China returns to trading after one-week-long holidays and missed the recently hawkish plays, which in turn may push them towards taking any impressive steps to defend the yen and the same may help the NZD/USD prices to keep the latest bounce.

Technical analysis

Failures to cross the previous support line from August, around 0.6655 at the latest, direct NZD/USD sellers towards the yearly low near 0.6530.