NZD/USD pauses on the way to 0.6500 even as NZ/China data favor bears

• NZD/USD takes offers to renew intraday low, snaps eight-day uptrend.
• China PMIs came in mixed, NZ housing, ANZ numbers also disappoint Kiwi buyers.
• Mixed sentiment, firmer yields underpin US dollar rebound ahead of second-tier US data.

NZD/USD bounces off intraday low but remains pressured around a three-week high as it consolidates the two-week-old upward trajectory during Tuesday’s Asian session. The kiwi pair’s latest pullback could be linked to the mixed economics from China and New Zealand, as well as a rebound in the US dollar.

That said, China’s official activity numbers marked contraction for May as the headline NBS Manufacturing PMI marched 49.6 forecasts, versus 47.4 expected, while the Non-Manufacturing eased to 47.8, below 50.7 market consensus.

On the other hand, New Zealand (NZ) Building Permits slumped -8.5% in April versus 0.4% expected and 6.2% upwardly revised prior. Further, ANZ Activity Outlook and ANZ Business Confidence also tumbled and weighed on the NZD/USD prices. That said, the ANZ Activity Outlook for May dropped to -4.7% versus 5.7% expected and 8.0% prior whereas Business Confidence plummeted to -55.6, from -42 prior and -33.2 market consensus.

In addition to the most downbeat data, the market’s mixed sentiment and the US dollar rebound also weigh on the NZD/USD prices. That said, risk appetite weakens during early Tuesday as bond buyers take a breather, underpinning a pullback in riskier assets like equities and commodities. Also challenging the previous risk-on mood were headlines from Europe, as well as month-end consolidation. While portraying the mood, S&P 500 Futures take a U-turn from a three-week top, flashed the previous day, to retest the 4,155 level. Further, the US 10-year Treasury yields rise 8.5 basis points (bps) to 2.835% by the press time.

Looking forward, NZD/USD traders should pay attention to how full markets react to the recent shift in sentiment, as well as data. Also important will be Chicago Purchasing Managers’ Index and Dallas Fed Manufacturing Business Index for May.

Technical analysis

NZD/USD pulls back from the 50-day EMA, around 0.6565 by the press time, but an upward sloping support line from mid-May, close to 0.6510, tests the pair sellers.