NZDUSD extends pullback from seven-week high towards 0.5900 on softer China inflation

• NZDUSD takes offers to refresh intraday low on downbeat China inflation.
• China CPI eases to 2.1% YoY, PPI improved to -1.3% for October.
• Challenges to the previous risk-on mood also weigh on prices.
• US election updates, anxiety ahead of US CPI could tease the bears.

NZDUSD snaps a three-day winning streak while refreshing the intraday low near 0.5940 after China’s inflation data was released early Wednesday. In doing so, the Kiwi pair also extends the day-start pullback from the highest levels in seven weeks, marked the previous day.

China’s headline Consumer Price Index (CPI) dropped to 2.1% versus 2.4% market forecasts and 2.8% prior. However, the Producer Price Index (PPI) improved to -1.3% compared to -1.5% expected and 0.9% previous readings.

It should be noted that the fresh covid woes from the dragon nation also exert downside pressure on the Kiwi pair. That said, China reports the highest levels of new COVID cases in six months, with the latest addition of 8,335 for November 08, while marking a fresh virus-led lockdown in Guangzhou’s second district.

Furthermore, the early updates from the US mid-term elections suggest a too-close call between the Republicans and Democrats and highlight the chance of Republicans winning in at least one house. The same exert downside pressure on the previous optimism and the NZDUSD prices.

Earlier in the day, New Zealand’s Electronic Card Retail Sales eased to 1.0% MoM growth in October versus 1.3% prior and 0.2% expected. Further, the yearly figures suggest 16.6% increase in the data compared to 28.6% previous readings and 11.4% market forecasts.

While portraying the mood, Wall Street closed positive for the third consecutive day while the US 10-year Treasury yields snapped a four-day uptrend. Further, the S&P 500 Futures print mild gains at the latest. However, the market’s optimism seems to fade and the same could weigh on the NZDUSD prices ahead of the key US inflation numbers and US election results.

Technical analysis

A one-month-old ascending trend line restricts short-term NZDUSD upside near 0.5980 while the 50-DMA level near 0.5820 and an upward sloping support line from October 13, close to 0.5800, challenge the pair bears.