NZD/USD rebound approaches 0.6250 despite softer NZ data

• NZD/USD pares recent losses around the lowest levels since May 2020.
• New Zealand’s Business NZ PMI eased to 51.2 in April.
• Fed’s Powell reiterates 50 bps rate hike concerns, Fed’s Daly turns down debate on the pace of rate lifts.
• Risk-aversion keeps USD firmer, US Michigan Consumer Sentiment Index eyed.

NZD/USD picks up bids to 0.6245 while portraying a corrective pullback from the lowest levels in 24 months, flashed on Thursday, as bears take a breather amid a quiet Asian session on Friday. In doing so, the Kiwi pair ignores recently softer activity data from New Zealand (NZ).

That said, Business NZ PMI dropped to 51.2, below 52.8 market forecasts and 53.8 prior, in April. The activity data part ways from the previous day’s upbeat inflation expectations from the Reserve Bank of New Zealand (RBNZ) that raised concerns about the Kiwi central bank’s widely chattered 50 basis points (bps) of a rate hike in June.

It’s worth noting, however, that the kiwi pair’s latest rebound isn’t a sign of recovery as broad economic fears join the Fed’s faster tightening to keep the US dollar ahead of everybody on the currency platter. That said, the US Dollar Index (DXY) refreshed its 20-year high around 105.00 on Thursday, before easing to 104.80 afterward.

The latest pullback in the greenback gauge could be linked to comments from Fed Chairman Jerome Powell as he repeated the expectation that the Fed will raise interest rates by half a percentage point at each of its next two policy meetings. The Fed boss also pledged that if data turn the wrong way "we're prepared to do more." On the same line were statements from President and CEO of the Federal Reserve Bank of San Francisco, Mary C. Daly who mentioned, “Is it 50, is it 25, is it 75? Those are things that I’ll deliberate with my colleagues, but my own starting point is we don’t want to go so quickly or so abruptly that we surprise Americans”.

Amid these plays, the US 10-year Treasury yields also portray a corrective pullback after refreshing a two-week low the previous day, around 2.86% by the press time, whereas the S&P 500 Futures print mild gains while licking its wound near one-year low.

Moving on, the preliminary readings of US Michigan Consumer Sentiment data for May, expected 64 versus 65.2 prior, will be important data to watch but major attention should be given to qualitative catalysts for clear directions.

Technical analysis

Unless crossing the mid-2020 lows surrounding 0.6380, NZD/USD prices are vulnerable to testing April 2020 peak of 0.6176.