NZD/USD recedes from monthly top below 0.6600 after China inflation data

• NZD/USD extends pullback from June month high of 0.6585.
• China’s CPI grew more than 2.5% to 2.7% but PPI dropped below -3.2% to -3.7% on YOY.
• Australian states keep battling to tame the virus spread, US figures cross 3.0 million.
• New Zealand’s ANZ data have been upbeat off-late but failed to ignore the risk reset.

NZD/USD drops to 0.6565, down 0.20% on a day, amid the Asian session on Thursday. The pair’s latest weakness could be traced from its failures to cross June month’s top as well as mixed inflation numbers from China. In doing so, the kiwi pair ignores upbeat early economic signals from the Australia and New Zealand Banking Group (ANZ).

China’s headline Consumer Price Index (CPI) YoY matches 2.5% expected figures in June while the monthly figures slipped below 0.0% forecast to -0.1%. Further, the Producer Price Index (PPI) extended the deflationary pressure despite recovering from -3.2% forecast to -3.0.

Read:China Consumer Price Index, YoY for June: 2.7% vs 2.5% expected

On the other hand, preliminary readings of ANZ Business Conditions for July recovered from -34.4 to -29.8 whereas ANZ Activity Outlook also improved from -25.9 to -6.8. Earlier during the day, ANZ Truckometer data for June mentions the rise of 14.5% in Heavy Traffic whereas Light Traffic Index surged 28%.

Although domestic fundamentals are brighter, the kiwi might be taking a hit as its largest customer Australia is struggling to tame the coronavirus (COVID-19) resurgence. After recalling the lockdown in Melbourne and delaying further easing of lockdown restrictions in the Australian Capital Territory, the Aussie policymakers recently extended the state of emergency until the end of August.

Elsewhere, the US cases surge over 3.0 million with the latest addition of 59,655 whereas figures from China stick to zero for the third day in a row. Further, Tokyo also snaps the seven-day run-up in numbers above 100 with recent statistics around 75 new cases.

It’s worth mentioning that the mix of data and virus woes join the US-China tussle, recently over the Hong Kong Security bill to probe the commodity-linked currencies’ strength. However, the US dollar weakness helps the bulls.

Market’s risk-tone refrain from extending the previous day’s mild optimism as S&P 500 Futures dwindles and so does the US 10-year Treasury yields. Further, stocks in New Zealand suggest mark over 1.0% loss amid a likely easing of virus-led aides and fears that the pandemic might reach the safe nation with the influx of locals from abroad. As a result, the traders will keep eyes on the US Jobless Claims and qualitative risk catalysts for fresh impetus.

Technical analysis

Only if the pair slips below June 23 top near 0.6530, it can recall the sellers targeting 0.6500. Otherwise, the bulls will keep attacking 0.6585 to aim for the late-January top near 0.6630.