NZD/USD drops back to 0.7150 on New Zealand’s record trade deficit

• NZD/USD consolidates weekly gains after Tuesday’s sluggish performance.
• New Zealand trade deficit refresh record top, Imports and Exports grow in September.
• Market sentiment dwindles as DXY stays firm despite softer Treasury yields, mildly bid equities near record top.
• Aussie Inflation numbers, ANZ monthly sentiment data eyed ahead of US Durable Goods Orders.

NZD/USD remains pressured around 0.7155 after the dismal New Zealand trade deficit release, having reversed the upside momentum towards 0.7200 the previous day.

New Zealand (NZ) Trade Balance shrank more than $-2139M (revised) prior to $-2171M in September to mark the all-time low MoM figures. However, the Imports and Exports were better than their previous readouts as the former rose past $6.495 billion to $6.57 billion whereas the latter grew to $4.4 billion versus $4.351 billion.

In addition to the downbeat NZ data, mixed sentiment in the market and the US dollar strength also weigh on the NZD/USD prices.

Although hopes of the US stimulus and Sino-American talks join the receding coronavirus fears to keep the market’s mood positive, strong US data and caution ahead of the US advance estimation for Q3 GDP and Fed tapering woes challenge the optimists.

It should be noted that the firmer earnings and recently positive US data helped Wall Street benchmarks to cling to record tops, backed by softer US 10-year Treasury yields around 1.61%. However, the US Dollar Index (DXY) refreshed its weekly top during the second consecutive daily upside, recovering from the monthly low, while poking the 94.00 threshold by the end of Tuesday’s North American session.

Talking about data, US CB Consumer Confidence unexpectedly recovered in October while figures concerning New Home Sales for September and Richmond Fed Manufacturing Index for the last month also flashed better-than-forecast numbers.

Having witnessed the initial reaction to NZ trade numbers, NZD/USD traders will pay attention to the Australia and New Zealand Banking Group’s (ANZ) monthly sentiment data for October before the Q3 inflation figures for Australia. Following that, US Durable Goods Orders for September may entertain markets before the key US GDP figures, up for publishing tomorrow.

Regarding Aussie inflation and its impact on NZD/USD, ANZ said, “While not directly relevant to the NZD, any surprises will impact the AUD, and by correlated association, the NZD. Chief among the market’s fears: a big upside surprise like that seen here last week. If that were to happen, the AUD would likely spike sharply higher, taking NZD with it.”

Technical analysis

NZD/USD pair’s latest pullback is yet to negate the previous rebound from the 5-day EMA, which in turn directs the bulls toward a four-month-old resistance line near 0.7220 but nearly overbought RSI conditions may challenge further upside. On the contrary, a downside break of the immediate EMA support, around 0.7150 by the press time, should trigger a short-term pullback targeting late September highs near 0.7090. Though, the latest swing low of 0.7130 may act as an extra filter to the south.