NZD/USD retreats towards 0.6600 on downbeat China inflation data, cautious mood

• NZD/USD refreshes intraday low, consolidates the previous day’s bounce off weekly bottom.
• China CPI, PPI both dropped below market forecasts and prior readings in January.
• Sour sentiment also weighs on the Kiwi pair amid mixed concerns over Russia.
• Cautious mood ahead of FOMC Minutes, US Retail Sales also challenge pair buyers.

NZD/USD pares recent gains by refreshing intraday low around 0.6630 on downbeat China data during Wednesday’s Asian session.

The Kiwi pair bounced off an eight-day low on Tuesday as market sentiment improved. However, mixed concerns over Russia, cautious sentiment ahead of the key US data/events and downbeat inflation figures from the key customer weigh on the quote of late.

That said, China’s headline Consumer Price Index (CPI) missed 1.0% YoY forecasts with 0.9% mark, versus 1.5% prior. Further, the Producer Price Index (PPI) also declined to 9.1% YoY compared to 9.5% market consensus and 10.3% prior.

Read: Breaking: Chinese inflation miss pressures AUD/USD, bulls now rely on risk appitite returning

Elsewhere, the previous optimism surrounding the Russia-Ukraine war seems to fade as comments from Russian President Vladimir Putin and his US counterpart Joe Biden keep the geopolitical risk on the table. That said, Russia’s Putin conveyed dissatisfaction with how negations are going over Ukraine’s NATO membership while US President Biden said, “Russian attack on Ukraine still very much a possibility.”

Additionally, escalating concerns over Fed’s rate-hike ahead of today’s US Retail Sales and Federal Open Market Committee (FOMC) Minutes also challenge NZD/USD traders. It’s worth noting that the US Producer Price Index (PPI) data showed a hot factory-gate inflation figure supporting the Fed’s rate-hike concerns on Tuesday. That said, the PPI rose past 9.1% YoY expectations to 9.7%, versus upwardly revised 9.8% prior, in January whereas the Producer Price Index ex Food & Energy, also known as Core PPI, rallied to 8.3% versus 7.9% market consensus. Additionally, NY Empire State Manufacturing Index eased below 12.15 forecasts to 3.1, compared to -0.7 previous readouts.

Considering the data, the latest Reuters poll said, “Recently, a Reuters poll said, “The US Federal Reserve will kick off its tightening cycle in March with a 25-basis-point interest rate rise, a Reuters poll of economists found, but a growing minority say it will opt for a more aggressive half-point move to tamp down inflation.”

While portraying the mood, the US 10-year Treasury yields and stock futures remain on the back foot by the press time.

Given the market’s anxiety and downbeat China data, NZD/USD may witness further downside. However, it all depends upon the risk catalysts and Fed Minutes.

Read: FOMC Minutes Preview: Dollar selling opportunity? Doves set for a comeback after hawkish meeting

Technical analysis

Unless crossing the previous support line from late January, around 0.6690, NZD/USD traders can keep targeting 2022 low of 0.6529. That said, the 21-DMA level of 0.6652 guards the quote’s immediate upside.