NZD/USD: Risk-on mood, US dollar pullback favor recovery moves eyeing 0.7200 ahead of China CPI

• NZD/USD bulls catch a breather after the quote rose for the first time in last five days the previous day.
• US Treasury yields, greenback witnessed a pullback as markets cheer nearness to $1.9 trillion covid relief package.
• RBNZ removed some of the temporary liquidity facilities put in place during the COVID-19 pandemic.
• February’s New Zealand Electronic Card Retail Sales, China Inflation should offer immediate direction, US CPI, stimulus be the key.

NZD/USD recovery stalls around 0.7170, keeping the upside momentum, amid the early Wednesday morning in Asia. The kiwi pair marked notable recovery moves, printing the heaviest gains in two weeks, the previous day as the US dollar weakness joined upbeat market sentiment. In doing so, the quote paid a little heed to the latest announcement from the Reserve Bank of New Zealand (RBNZ).

Despite witnessing soft Manufacturing Sales for Q4 and downbeat sentiment figures from the Australia and New Zealand Banking Group (ANZ), NZD/USD managed to recall the buyers as the US dollar index (DXY) took a U-turn from a four-month top. Also favoring the bulls could be the declines in the US Treasury yields and run-up in the equity markets as traders await American House votes on President Joe Biden’s $1.9 trillion covid relief bill.

That said, the US dollar index (DXY) dropped back below 92.00 after rising to 92.50, the highest since November 24, 2020, the previous day. At the same time, the US 10-year Treasury yield also weakened six basis points (bps) to revisit the 1.53% level by the end of Tuesday’s North American trading. It’s worth mentioning that the Wall Street benchmark cheered the stimulus with Nasdaq rising 4.0%, closing with 3.69% gains, by the press time.

Having pushed the much-awaited stimulus through the House and the Senate earlier, the $1.9 trillion aid package returns to the US House for a final vote. Although there are no major barriers for the same considering the Democrats’ readiness to accept a few suggestions from the Republican Party, US House Speaker Nancy Pelosi signaled on Tuesday that the bill may be delayed to Wednesday.

Elsewhere, RBNZ announced the removal of the Term Auction Facility (TAF) and the Corporate Open Market Operation (COMO), unveiled during the coronavirus (COVID-19) times to pump the markets, in the latest move to return to the normal. The news failed to offer any major reaction from the NZD/USD traders despite suggesting the hidden reflation fears.

Looking forward, New Zealand’s February month Electronic Card Retail Sales, prior -0.4% MoM, will precede China’s Consumer Price Index (CPI) and Producer Price Index (PPI) data for the said month, expected to print soft readings, can direct immediate NZD/USD moves. However, major attention will be given to the stimulus headlines and the US inflation figures for the previous month as well as US Treasury yield moves.

Technical analysis

Recovery moves from the yearly bottom surrounding 0.7100 need to regain above 50-day SMA level of 0.7216 to recall the NZD/USD buyers. Meanwhile, a decisive downside break of the 0.7100 threshold will be tested eye the 100-day SMA, at 0.7072 now.