NZD/USD flirts with 0.7200 amid off in New Zealand, China trade data eyed

• NZD/USD fades Friday’s recovery moves amid quiet session in Asia.
• US Treasury Secretary Yellen praised higher interest rate at G7.
• US jobs report roiled tapering speculations with downbeat NFP, Participation Rate.
• New Zealand markets are off due to Queen’s Birthday, focus China’s trade numbers for May for immediate direction.

NZD/USD portrays a sluggish start to the week despite a 15-pips downside gap to begin Monday’s Asian session around 0.7200. While an extended weekend in New Zealand could be probed for the recent inactivity of the kiwi pair, Friday’s US jobs report and the contrasting comments from US Treasury Secretary Janet Yellen seem to play their role of late. Hence, the pair traders await China’s trade numbers for May.

Mixed messages continue…

Market players have been struggling with mixed signals concerning the Fed’s next moves, which in turn keep the Antipodeans range-bound and limit the US dollar weakness of late.

The fresh hopes of tapering, on inflation signals and chatters over the Fed’s dialing back of the key support measures used during the pandemic, faded after a disappointing fall in Friday’s US Nonfarm Payrolls (NFP) to 559K. Also receding challenges to the US Federal Reserve’s (Fed) easy money policies was a softer than previous Participation Rate of 61.6% that dimmed impacts of 5.8% Unemployment Rate versus 6.1% prior readouts.

Following the news, the US dollar index (DXY) shed the previous gains to drop back towards the 90.00 threshold. However, the weekend comments from US Treasury Secretary Yellen mentioned, “A slightly higher interest rate environment would be a plus for the Fed.” The same put a fresh safe-haven bid under the US dollar and weighed down the Kiwi amid a likely sluggish session.

Given the lack of clarity over the Fed’s action in the June meeting, coupled with an off in New Zealand, NZD/USD pair may remain subdued. However, China’s May month’s trade figures can offer intermediate moves to the quote. Among them, the expected jump in headlines Trade Balance to $50.5 B, versus $42.85 B prior, coupled with upbeat forecasts for Exports and Imports, may help the NZD/USD defend the 0.7200 round figure. It's worth noting that the risk catalyst, mainly relating to the Fed’s next moves, will be the key to watch.

Technical analysis

A 200-pips area between 0.7320 and 0.7120 becomes the key range for NZD/USD. Within that, 50-day SMA around 0.7175 and 21-day SMA near 0.7220 restrict immediate moves of the kiwi pair.