NZD/USD hits YTD low amid China’s real estate concerns, high US yields

• China’s property crisis and weak recovery data amplify global risk aversion, favoring the US Dollar.
• US 10-year Treasury bond yield at 4.172%, with the DXY index gaining 0.18%, pressuring the NZD/USD.
• RBNZ will likely maintain a 5.50% rate, as Kiwibank analysts predict a hold until inflation targets are met.

NZD/USD posts modest gains in the North American session amid a risk aversion spurred by China’s real estate woes triggering a flight to safe-haven assets and bolstering the Greenback, which remains underpinned by high UST bond yields. The NZD/USD is trading at 0.5985, up 0.07%, after reaching a new year-to-date (YTD) low of 0.5943.

Greenback gains strength as risk aversion dominates; RBNZ anticipates to hold rates amid New Zealand economic challenges

Wall Street has turned positive in the day, though the story favors the Greenback in the FX space. The latest week’s soft data from China portrays a weaker economic recovery, while its property crisis keeps investors uneasy.

US Treasury bond yields edged higher during the session, though they had pared their earlier gains, with the US 10-year Treasury bond yield sitting at 4.172%, clinging to gains of one basis point. The US Dollar Index (DXY), which measures the buck’s value against a basket of peers, gains 0.18% and stays at 103.034, with headwinds for the NZD/USD.

The US economic calendar will feature US Retail Sales, which are expected to improve compared to June’s data, while Import and Export prices are expected to increase a tick. Manufacturing activity in New York is expected to remain subdued, while Fed speakers could give some clues regarding the Fed’s forward path.

On the New Zealand front, the Reserve Bank of New Zealand (RBNZ) is expected to keep rates unchanged at 5.50%, as the NZ economy remains in a mild recession, while inflation has fallen to 6.0%, from 7.3% last year. Analysts at Kiwibank said, “The cash rate has peaked...and will remain there until the RBNZ is convinced inflation will return to the target.”

NZD/USD Price Analysis: Technical outlook

From a technical standpoint, the NZD/USD remains downward biased, reaching a new YTD low, but buyers entered the market, lifting the pair to test the prior’s YTD low of 0.5985. A daily close above the latter and the NZD/USD could regain the 0.6000 figure, with the next resistance emerging at 0.6024. Otherwise, the NZD/USD could extend towards 0.5900 before testing last year’s November 10 swing low of 0.5840.