NZD/USD pares intraday losses around 0.6450 on softer USD, upbeat China data

• NZD/USD licks its wounds during five-day downtrend, bounces off daily low.
• US dollar fails to cheer firmer Treasury yields amid pre-ECB anxiety.
• China reports upbeat trade numbers for May, floods in Hunan trim optimism.
• ECB’s verdict, US inflation are the key catalysts ahead of next week’s FOMC.

NZD/USD picks up bids to reverse daily loss around 0.6455, probing a four-day downtrend heading into Thursday’s European session. The kiwi pair’s latest rebound could be linked to the broad US dollar pullback, as well as upbeat data from China.

US Dollar Index (DXY) fades the previous day’s recovery moves near 102.50, down 0.07% intraday, as hawkish expectations from the European Central Bank (ECB) allow traders to slow down on the USD buying. In doing so, the greenback gauge ignores the firmer US Treasury yields. That said, the US 10-year Treasury yields seesaw around 3.04% after rising over five basis points (bps) the previous day.

Also supporting the NZD/USD recovery are the stronger-than-expected trade numbers from China. The nation’s Trade Balance came in at +78.76B versus +58B expected and +51.12B previous. Further details suggest upbeat figures for Imports and Exports for May.

Although the market’s consolidation allows the NZD/USD to pare recent losses, the broad pessimism surrounding inflation and growth exerts downside pressure on the Kiwi pair. These fears could be linked to comments from the White House, OECD and the World Bank. On Wednesday, White House spokeswoman Karine Jean-Pierre said they expect the inflation numbers to be released at the end of the week to be elevated. Additionally, the Organisation for Economic Co-operation and Development (OECD) cuts the global growth outlook for 2022 while World Bank (WB) President David Malpass warned that faster-than-expected tightening could recall a debt crisis similar to the one seen in the 1980s.

Moving on, ECB is all set to announce an end of the bond purchase and may keep the US dollar down. Though, clues for the July rate hike and economic forecasts will be crucial to watch for clear directions.

Technical analysis

NZD/USD bears flirt with 21-DMA support, around 0.6430 by the press time, a daily break of the same becomes necessary to witness the pair’s further declines towards 0.6380 horizontal support. Meanwhile, recovery moves need to cross the convergence of the 50-HMA and the immediate resistance line, near 0.6460-65, to please the bulls.