NZD/USD snaps two-day losses ahead of RBNZ inflation expectations, China trade data

• NZD/USD benefits from the Aussie catalysts, recovers from weekly lows.
• RBA’s Lowe sounds optimistic despite citing coronavirus risk.
• Trade sentiment remains static before the key data/events from New Zealand, China and the US.

NZD/USD holds onto recovery gains while trading near 0.6460 during the Asian session on Friday. That said, the pair currently deviates from the previous two-day losses after the RBA Governor’s testimony.

The Reserve Bank of Australia Governor Philip Lowe testified before the House of Representatives’ Standing committee on Economics. The policymaker initially said that Australia’s economic growth will pick up to 2.75% this year and 3% over 2021 while also turning down the possibilities of negative interest rates. Though, fears of coronavirus couldn’t be ignored by the RBA leaders afterward.

The quote’s previous declines could be attributed to the broad US dollar strength backed by the positive signals to January employment data, up for publishing today at 13:30 GMT. While ADP Employment Change and ISM Non-Manufacturing PMI were the biggest supporters, the recent outcomes of upbeat Jobless Claims and Nonfarm Productivity also played their part.

On the trade front, China signaled that it will halve the tariffs on some of the US goods. With that, the dragon nation showed readiness to respect the phase-one deal and indicated a softer start to the phase-two agreement talks.

Despite positive data and trade headlines, markets’ risk-tone remained mostly under pressure as traders might be waiting for the key data/events. The US 10-year treasury yields stay around 1.65% whereas S&P 500 also mark 0.01% gains to 3,349.

Moving on, the forward-looking indicator from the Reserve Bank of New Zealand (RBNZ) will be the key to watch especially after its previous decline to 1.8%, the lowest since the fourth quarter (Q4) 2016. Following that, China’s January month trade data might portray the impact of coronavirus and will also be important to watch. However, the major attention of the investors will be on the US employment data as a disappointment after the upbeat early indicators could move the markets against the greenback.

Technical Analysis

A 200-day SMA level of 0.6505 offers the immediate resistance while late-November 2019 high near 0.6440 can restrict the pair’s near-term declines.