NZD/USD fades bounce off fortnight low under 0.6800 amid anxiety over Ukraine, Fed

• NZD/USD fails to extend the first daily gain in three on mixed concerns, downbeat data at home.
• Equities improved as yields retreat from multi-day high, commodities remained pressured as well.
• Russian President Vladimir Putin dashes hopes of any solution from talks, Ukraine hints at compromise.
• China covid updates, Kyiv-Moscow news and US Retail Sales eyed ahead of Fed’s verdict for clear direction.

NZD/USD steps back to 0.6770 during early Wednesday morning in Asia, following a failed attempt to cross the 0.6800 during the previous day’s rebound.

The kiwi pair’s recovery on Tuesday could be linked to the cautious optimism over Ukraine-Russia talks, as well as strong data from China. However, pre-Fed anxiety joins recently mixed concerns over peace in Kyiv, not to forget downbeat New Zealand data to weigh on the NZD/USD prices of late.

That said, New Zealand’s Current Account for Q4 dropped to $-7.26B versus $6.213B expected and $-8.3B prior. Further, the Current Account – GDP Ratio for the stated period worsened to -5.8% compared to -5.6% market forecast and -4.6% previous readouts. On Tuesday, Business NZ PSI improved to 48.6 from 45.9 for February, preceding the upbeat prints of China Retail Sales and Industrial Production for the said month.

Elsewhere, global markets initially cheered hopes of the Ukraine-Russia peace, as signaled by Ukraine President Volodymyr Zelenskyy’s adviser, before Russian President Vladimir Putin said Kyiv is not serious about finding a mutually acceptable solution. Following that, Mykhailo Podoliyak, one of the representatives of Ukraine at Russian-Ukrainian negotiations cites room for compromise. It’s worth noting that the UK added more sanctions on Russia whereas Japan is up for removing Moscow from favored trade status. In return, Moscow banned Canadian PM from entering their country and levied sanctions on US President Joe Biden. Hence, the conditions relating to the Ukraine-Russia war aren’t clear but a halt in further deterioration seems to recede the fears of late.

It’s worth noting that China’s record covid numbers and lockdowns in multiple cities renew early pandemic woes and weigh on the NZD/USD prices.

Talking about the US data, the US Producer Price Index (PPI) matched YoY expectations of 10% growth whereas NY Empire State Manufacturing Index printed the biggest downside since May 2020.

Amid these plays, Wall Street benchmarks closed in the positive territory while the US Treasury yields ended Tuesday unchanged despite rising to mid-2019 levels during the initial day.

Looking forward, covid updates from China precede US Retail Sales for February, expected 0.4% from 3.8% prior, to entertain NZD/USD traders before directing them towards the Federal Open Market Committee (FOMC). Additionally, chatters surrounding Ukraine-Russia woes are also important for fresh clues.

Technical analysis

NZD/USD fades bounce off 50-DMA level of 0.6727 amid bearish MACD signals, suggesting another attempt to meet an upward sloping support line from late January, near 0.6720 by the press time. Meanwhile, 100-DMA around 0.6815 guards immediate upside.