NZD/USD snaps two-day downtrend below 0.6400 on softer US Dollar, focus on PMIs

• NZD/USD picks up bids to pare the first weekly loss in nine.
• US Dollar fails to trace firmer yields amid sluggish markets.
• Central banks renewed recession woes and favored USD bulls previously.
• China-linked headlines keep Kiwi bears hopeful ahead of US activity data for December.

NZD/USD picks up bids to 0.6370 as Kiwi bulls return on early Friday, after a two-day absence.

The quote dropped during the last two days as global central banks rushed towards higher rates to tame inflation. Also exerting downside pressure on the pair could be the risk-negative headlines surrounding China. That said, a lack of major data/events in the Asian session and the market’s consolidation after volatile days seemed to have triggered the NZD/USD’s corrective bounce.

Even so, the challenges to sentiment and expectations favoring the US Dollar keep the bears hopeful ahead of the preliminary US activity numbers for December.

That said, global central banks propelled benchmark rates in the latest monetary policy announcements and showed readiness to keep the rates higher for longer, which in turn added strength to the risk-off mood amid recession woes. US Federal Reserve, Bank of England, Swiss National and the European Central Bank were among the key central banks that shook markets this week and renewed economic slowdown fears.

Elsewhere, US President Joe Biden’s crackdown on Chinese chipmakers also weighed on the market sentiment and allowed the US Dollar to stay firmer, while also drowning the Wall Street benchmarks and favoring the US Treasury bond yields.

With this in mind, the NZD/USD bears appear standing at the gate while waiting for the US PMIs for December. It’s worth noting, however, that the market forecasts surrounding the US S&P Global PMIs appear mixed as Services activities are likely to improve but not the manufacturing ones. Even so, both these sectors are expected to print the below 50 figure that suggests a contraction in activities and could weigh on the US Dollar in case of flashing downbeat figures.

Technical analysis

A five-week-old ascending support line, near 0.6340 by the press time, restricts the short-term NZD/USD downside.