NZD/USD: Depressed around monthly low above 0.7100, eyes China data dump

• NZD/USD fades late-Friday’s bounce off 0.7118, stays pressured near monthly low.
• Risk aversion favors US dollar, virus, vaccine updates join doubts over US stimulus to weigh on mood.
• US markets are off due to Martin Luther King’s Birthday, no major data from New Zealand.
• China GDP, Retail Sales and Industrial Production will be the key.

NZD/USD takes rounds 0.7140 during the early Asian session on Monday. In doing so, the kiwi pair fails to keep the late Friday’s corrective pullback after declining to the lowest since December 29. While challenges to the risks have been the major reason for the quote’s latest weakness, key data from China, one of New Zealand’s largest customers will be important to watch for immediate direction. It should, however, be noted that the risk catalysts shouldn’t be ignored in the process.

Virus woes, stimulus jitters and the rest…

Despite a smooth start to the coronavirus (COVID-19) vaccinations in the major developed countries, the virus infection and worries over the strains found in the UK and South Africa challenged the mood off-late. However, the latest covid figures seem to ease and vaccine producers are also optimistic about taming the virus variants, which in turn can renew risk sentiment.

US President-elect Joe Biden proved his words of huge stimulus by announcing one during the last week. Though, doubts over whether the Fed will follow his path and will the heavy aid package help overcome the pandemic weighed on the risks off-late. As per the Wall Street Journal, upcoming Fed Chairwoman Janet Yellen will affirm commitment to a market-determined level for the USD rate.

Elsewhere, political uncertainty in Italy and the US-China tussle are extra downers for the risks and help the US dollar. That said, Wall Street benchmarks had to end the last week on a negative side while the US Dollar Index (DXY) jumped to the one-month high on Friday.

Looking forward, risk catalysts will be the key for the NZD/USD traders but headline data from China, including the fourth-quarter (Q4) GDP and December’s Retail Sales and Industrial Production, can also offer intermediate direction to the quote. Forecasts suggest GDP may jump from 4.9% to 6.1% YoY and 3.2% versus 2.7% prior on QoQ. Further, Retail Sales can also rise from 5.0% previous readouts to 5.5% whereas Industrial Production may ease to 6.9% from 7.0% marked in November.

It should be noted that likely improvement in economic conditions from China can offer short-term recovery moves to the kiwi pair. However, risk aversion and an absence of the US traders may tame the upside momentum.

Technical analysis

A sustained downside break of 21-day SMA and an ascending trend line from November 13, respectively around 0.7175 and 0.7155, directs the NZD/USD sellers towards the early December 2020 high near 0.7100.