NZD/USD remains pressured around 0.6800, US inflation eyed

• NZD/USD braces for the first weekly gain in six, snapped two-day uptrend before steadying.
• Market’s anxiety ahead of key weekly events joins mixed updates over Omicron and China to weigh on sentiment.
• New Zealand Business NZ PMI eased to three-month low in November, Electronic Card Retail Sales came in mixed.
• Risk catalysts may offer intermediate direction during the likely dull day ahead of US CPI.

NZD/USD struggles for clear direction around 0.6800 during early Friday morning in Asia, after stepping back from the weekly top the previous day. The Kiwi pair dropped for the most in a week on Thursday as risk appetite soured amid a light calendar. That said, the quote’s latest performance could be linked to the market’s cautious mood ahead of the US Consumer Price Index (CPI) for November.

Mixed updates concerning the South African covid variant, namely Omicron, joined geopolitical fears surrounding China and Iran to weigh on the market sentiment the previous day. The economic calendar was also light with the US Initial Jobless Claims preceding the recently released New Zealand NZ Business PMI and Electronic Card Retail Sales. Further, China's CPI came in firmer but PPI eased from a multi-year high.

US Initial Jobless Claims dropped to the lowest levels since 1969, 184K versus 215K expected and 227K forecast, raising odds of the faster tapering by the US Federal Reserve (Fed) ahead of today’s key inflation data and the next week’s Federal Open Market Committee (FOMC) meeting. China’s Consumer Price Index (CPI) jumped the most since August 2020, by 2.3% YoY and 0.4% MoM in November whereas the Producer Price Index (PPI) crossed 12.6% forecasts to arrive at 12.9% YoY in November, easing from a 26-year high posted the last month.

At home, NZ Business PMI eased below 56.7 market consensus and 54.3 previous readings to 50.6 while Electronic Card Retail Sales recovered to +2.9% YoY from -7.6% prior but eased on MoM to 9.6% from 10.0% printed in October.

Elsewhere, the return of lockdowns in Europe and the UK, as well as protective measures in parts of the US, renew COVID-19 fears even as global policymakers followed scientists suggesting three vaccine shots as effective against the virus variant. The fears could be linked to the Japanese study saying Omicron is four-time more transmissible than the other covid strains.

On the other hand, Fitch termed China’s Evergrande as “restricted default” and pushed the People’s Bank of China (PBOC) to raise the reserve requirement ratio (RRR) on banks' foreign currency holdings.

Additionally, the US-Russia and the Sino-American tussles join the latest one between Washington and Tehran to weigh on the risk appetite.

Above all, the market’s indecision ahead of the key US inflation data and the next week’s super-pack central bank actions portray a risk-off mood and challenge the NZD/USD prices.

Amid these plays, Wall Street benchmarks closed in the red while the US 10-year Treasury yields drops 1.2 basis points to 1.497% while gold and crude prices also weakened.

Looking forward, a lack of major data/events will keep NZD/USD traders at the mercy of the US CPI.

Read: US Consumer Price Index November Preview: Inflation is the new cause celebre

Technical analysis

A convergence of monthly and fortnightly resistance lines challenged NZD/USD rebound on Thursday. The receding bullish bias of MACD and RSI retreat supports the following pullback moves, which in turn suggests further declines towards immediate horizontal support near 0.6765. On the contrary, recovery moves will get validation on crossing the weekly top of 0.6824.