NZD/USD ignores NZ trade numbers below 0.6100 with eyes on US NFP

• NZD/USD defends the late Friday’s corrective pullback from seven-week low despite downside data.
• New Zealand’s Q2 Terms of Trade Index dropped to -2.4% versus -1.3% expected.
• China concerns, strong yields exert downside pressure amid a light calendar at home.
• US NFP will be the key as DXY refreshed the 20-year high ahead of the release.

NZD/USD holds onto the corrective bounce from the 1.5-month low near 0.6080 despite downbeat New Zealand (NZ) trade data during early Friday in Asia. In doing so, the Kiwi pair portrays the consolidation ahead of the key US Nonfarm Payrolls (NFP) while snapping a three-day downtrend.

As per the latest trade numbers from the Statistics New Zealand, the Terms of Trade fell 2.4% in the second quarter (Q2), reported Reuters. The details mentioned that Export prices rose 3.7 percent, while imports increased 6.5 percent. Economists were expecting the index to show a 1.3 percent fall, with export prices rising 0.8 percent and imports up 2.5 percent, according to a Reuters poll.

Although the quote remains ignorant of the data while taking rounds to 0.6080, it stays near the lowest levels in seven weeks as markets love the US dollar amid broad pessimism and hawkish Fed bets. Also, sour sentiment surrounding the world’s largest commodity user China exerts additional downside pressure on the NZD/USD prices.

A covid-led lockdown in China’s Chengdu city joins downbeat Caixin Manufacturing PMI to portray grim conditions for the world’s second-largest economy. On the same line could be the escalating geopolitical tension between Beijing and Washington, via Taiwan.

On the other hand, the hawkish Fedspeak and firmer US data underpins the US dollar demand. That said, Atlanta Fed President Raphael Bostic said that the Fed has work to do with inflation, a 'long way' from 2%. Also, the newly appointed Dallas Fed President Lory Logan joined the lines of hawkish fellow US central bankers while saying, “Restoring price stability is No. 1 priority.”

US ISM Manufacturing PMI reprinted the 52.8 figure for August versus the market expectations of 52.0. Further, the final reading of S&P Manufacturing PMI for August rose past 51.3 initial estimates to 51.5, versus 52.2 prior final for July. On the same line, US Initial Jobless Claims dropped to 232K versus 248K forecast and 237K prior. Further, the Unit Labor Cost rose 10.2% QoQ during the second quarter (Q2) versus 10.7% expected while Labor Productivity dropped by 4.1% during Q2 versus the anticipated fall of 4.5% and -4.6% prior.

Against this backdrop, Wall Street closed mixed but the US 10-year Treasury yields rose to the highest levels since late June. More importantly, the 02-year counterpart jumped to the 15-year top. It should be noted that the CME’s FedWatch Tool signals 72% chance of the Fed’s 75 basis points of a rate hike in September versus nearly 69% previously.

Technical analysis

Unless bouncing back beyond the August 22 swing low, around 0.6155, NZD/USD remains vulnerable to refreshing the yearly bottom, currently surrounding 0.6060. In doing so, the 0.6000 psychological magnet and a downward sloping trend line from late January, near 0.5900 will be in focus.