NZD/USD stays depressed below 0.7400, pays a little heed to New Zealand trade numbers

• NZD/USD licks its wounds after snapping the five-day winning streak with the heaviest losses in a month.
• New Zealand Trade Balance for January turned negative on MoM, Exports, Imports also weakened.
• Antipodeans take clues from the market’s reflation fears, US dollar strength.
• Risk catalysts keep the driver’s seat, Treasury yields are worth observing.

NZD/USD shows a little reaction to New Zealand’s (NZ) January month trade numbers despite keeping the previous day’s downbeat performance around 0.7370 during the initial Asian session on Friday.

New Zealand’s January month trade figures suggest the headline Trade Balance dropped from upwardly revised figures of $69M and $2.98B to $-626M and $2.75B respectively on MoM and YoY. Further details suggest that the Imports dropped from $5.32B to $4.82B whereas the Exports declined to $4.19B versus $5.38B.

Market players are more concerned with the global rout in bonds off-late. The surge in Treasury yields weighed down the equities and helped the US dollar to stage a strong comeback from a seven-week low. The same dragged the NZD/USD down to mark the heaviest drop in a month following its run-up to the highest since August 2017 during Thursday’s Asian session.

While the risk-off mood strengthened the US dollar and offered heavy losses to the Antipodeans, second thoughts on the RBNZ’s acceptance of Finance Ministry guidelines, to consider housing and government policies for taking a decision, also weighed on the kiwi prices. “The RBNZ’s dual mandate remains unchanged, but from now on, the Bank must assess the impact of monetary policy on housing when making decisions. An important change, but not one that speaks to a need for tighter monetary policy,” said the Australia and New Zealand Banking Group (ANZ).

It’s worth mentioning that the mixed ANZ figures for New Zealand couldn’t withstand the strong US Q4 GDP, Durable Goods Orders and Jobless Claims, which in turn exerted extra downside pressure on the NZD/USD prices.

On a risk-positive side, Johnson & Johnson’s vaccine turned out to be the strongest cure for the coronavirus (COVID-19) with one-jab status after AstraZeneca, Pfizer and Moderna conveyed their upbeat results of the two-jab process. Also on the brighter side were the hopes of the US covid stimulus as the policymakers are up for voting on the much-awaited $1.9 trillion relief package in the House.

Amid these plays, Wall Street benchmarks dropped heavily, Nasdaq down over 3.5%, whereas the US 10-year Treasury yields refreshed yearly top around 1.60% before easing to 1.54%, up 15 basis points (bps) by the end of Thursday’s North American session.

Looking forward, chatters surrounding the US covid stimulus and vaccine news should join the fresh tension between the US and China, over the South China Sea. However, major attention will be given to the US Core PCE data and Treasury yields’ moves.

Technical analysis

Failures to keep the upside break of multiple highs marked since September 2017, around 0.7435-40, NZD/USD is likely to revisit January tops near 0.7315. However, its further weakness will have a bumpy road before breaking an ascending support line from November 2020, at 0.7200 now.