NZD/USD struggles around 0.7150 after the heaviest monthly jump of 2021

• NZD/USD remains pressured inside short-term trading range near five-month high.
• Virus woes regain traction in NZ, PM Ardern says daily infections could rise to 200.
• Reflation fears escalate across the board, China official PMIs remain softer.
• China Caixin PMI can entertain, US ISM PMI may entertain traders ahead of Tuesday’s speech from RBNZ’s Orr.

NZD/USD kick-starts November’s trading within a seven-day-old trading range, taking rounds to 0.7150 during early Monday morning in Asia. The kiwi pair printed a three consecutive weekly upside at the latest, not to forget posting the biggest monthly gain of 2021. However, Friday was a spoiler with the biggest daily losses amid fresh fears concerning the coronavirus and reflation, not to forget month-end positioning.

With the US Employment Cost Index and Core PCE Inflation numbers giving additional reasons for the Fed to announce tapering, the US Dollar Index (DXY) portrayed the heaviest daily gains since June 16. The inflation fears earlier got a push from Fed Chair Jerome Powell’s speech where he dumped statements terming them as ‘transitory’.

On a different page, the greenback strength could also be linked to the hopes of US stimulus as President Joe Biden remains ready to do push Senators for a deal on the much-awaited infrastructure spending this week.

Other than the US catalysts, recently rising COVID-19 numbers in New Zealand (NZ) also challenge NZD/USD bulls. As per the latest comments from NZ PM Jacinda Ardern, quoted by NZ Herald, “Daily Covid cases could peak at 200 in November.” The Pacific nation witnessed record daily covid cases of 160 on Saturday, per the news. “Cabinet will review alert level settings in Auckland and Waikato today, with both regions eyeing a move out of strict lockdown restrictions,” add NZ Herald.

Additionally, China’s official PMIs for October also exert an additional burden on the NZD/USD prices with the headlines NBS Manufacturing unexpectedly dropping to 49.2 in October from 49.6 booked in September, versus 49.7 forecast. Further, the Non-Manufacturing PMI fell to 52.4 in the reported month from September’s reading of 53.2 and against the expectations of 52.9.

Against this backdrop, US 10-year Treasury yields closed with nearly one basis point of a loss around 1.56% while Wall Street remained firmer around record tops.

It’s worth noting that the Reserve Bank of New Zealand (RBNZ) has already played its card of announcing rate hike and hence the Fed’s move is much awaited, offering an additional reason for the NZD/USD sellers amid reflation fears. The same highlights Tuesday’s speech from RBNZ Governor Adrian Orr, around 09:30 AM local NZ time (20:30 GMT).

Ahead of Orr’s speech, China’s Caixin Manufacturing PMI and US ISM Manufacturing PMI will entertain the NZD/USD traders. While China's numbers are likely to remain weak and please the pair sellers, further firming in the US data will escalate Fed tapering concerns and favor the US dollar bulls. Hence, the pair bears should wait for action ahead of the key week comprising the US Federal Reserve (Fed) monetary policy meeting.

Technical analysis

Although an area between 0.7130 and 0.7220 restricts short-term NZD/USD moves, recently easing RSI and MACD lines hint at a pullback towards the 200-SMA level surrounding the 0.7100 threshold. Meanwhile, an upside clearance of the 0.7220 hurdle should quickly propel the quote towards May month’s peak near 0.7320.