NZD/USD stays directed towards 0.6725 ahead of China data

• NZD/USD treads water following a negative start to the week.
• Confluence of 50-DMA, 50% Fibonacci retracement of January-March upside lures bears.
• Market sentiment remains cautiously optimistic amid mixed concerns over Ukraine-Russia crisis, covid fears from China.
• Bears can have additional support if China Retail Sales, Industrial Production ease even before the covid resurgence.

Having begun the week on a negative note, NZD/USD bears take a breather around 0.6750 during Tuesday’s Asian session. While broad risk-off mood weighed on the Kiwi pair in the last few days, the latest inaction could be linked to the mixed updates from Ukraine and China.

Sputnik quoted an Adviser to Ukraine President Volodymyr Zelenskyy’s office, Oleksiy Arestovych, to raise expectations of a Moscow-Kyiv peace in as early as two weeks or before late May. However, reports of a Russian drone over Poland and sanctions on Moscow, as well as Russia-Belarus rejection to pay energy supplies in the USD, challenge the NZD/USD bulls.

On Monday, market sentiment soured after an initially positive mood as optimism surrounding the Ukraine-Russia peace ebbed, also joined by the news of coronavirus resurgence in China.

China reported the highest covid cases since May 2020 the previous day and drowned Antipodeans with its lockdown in epicenter cities. Recently, the dragon nation announced activity restrictions in Langfang city near Beijing.

Other than the geopolitical and covid risks, escalating hopes of the Fed’s faster rate-hike trajectory also weighed on the NZD/USD prices of late, by way of the firmer US Treasury yields.

Amid these plays, US 10-year Treasury yields rose 13 basis points (bps) to refresh 32-month high whereas the Wall Street benchmarks closed in the red despite an upbeat start by the end of Monday’s North American session. It should be noted that the S&P 500 Futures print mild gains by the press time.

Moving on, China’s Retail Sales and Industrial Production for February, expected 3.0% and 3.9% YoY versus 1.7% and 4.3% respectively, will be important for the NZD/USD prices due to China’s trade ties with New Zealand. Should the figures ease, the quote will have an additional reason to worry and may portray further downside.

Technical analysis

A daily closing below the 21-DMA, around 0.6765 by the press time, directs NZD/USD towards a convergence of the 50-DMA and 50% Fibonacci retracement of January-March advances, close to 0.6725.