NZD/USD drops towards 0.7100 despite mixed data from China

• NZD/USD remains on the back foot while fading the bounce off fresh low in three weeks.
• China’s GDP improved on YoY but monthly activity numbers ease.
• Risks remain heavy, US dollar strong with eyes on Biden and Party.
• US Holiday, a light calendar will restrict market moves.

NZD/USD fades bounce off 0.7116 while declining to 0.7125, down 0.16% intraday, during early Monday. The kiwi pair recently eased as China’s activity numbers flashed mixed results. Also weighing on the quote could be the risk-off mood and the broad US dollar strength amid a light calendar and an off in the US.

China’s fourth-quarter (Q4) GDP grew from 6.1% to 6.5% YoY but eased on QoQ basis to 2.6% versus 3.2% forecast and 2.7% prior. Further, Industrial Production for December rose past-6.9% expected to 7.3% YoY whereas Retail Sales dropped below 5.0% previous readouts and 5.5% market consensus.

Read: Chinese data dump: Monthly activity weaker and GDP YoY beats

Talking about risks, the fears that US President-elect Joe Biden will discard American oil ties with Canada due to environmental issues as well as uncertainty over his fiscal stimulus to get accepted at the Federal Reserve also weigh on the risks.

Further, the incoming US Treasury Secretary Janet Yellen is likely to keep her commitment to the US dollar’s market-determined value which in-turn may challenge the latest upside momentum of the greenback and probed the mood off-late. Additionally, the virus woes are also present as the US, Europe and Japan witnessed a sustained increase in the coronavirus (COVID-19) numbers even if figures from the UK have been a bit low off-late. Also challenging the sentiment could be risks surrounding the spread of virus variants and doubts over the political career of Japanese PM Suga due to the virus.

Read: New UK covid stats lower despite variant, vaccine rolled out

Against this backdrop, S&P 500 Futures and stocks in Asia-Pacific remain depressed while the US dollar index (DXY) rises to a fresh high since December 21.

Looking forward, a lack of major data/events as well as Martin Luther King’s Birthday in the US will limit the market moves. However, any challenges to risks, which are more likely, will not hesitate to bring the NZD/USD prices southwards.

Technical analysis

While an ascending trend line from November 13 near 0.7155 guards the quote’s immediate upside, 21-day SMA surrounding 0.7175 adds to the upside filter and directs NZD/USD sellers towards the early December 2020 high near 0.7100.