NZD/USD: Struggles to regain 0.7200 as bears keep reins at seven-week low

• NZD/USD keeps Friday’s corrective pullback without gaps at weekly open.
• Treasury yields stay strong near February 2020 high amid reflation fears.
• US dollar bulls cheered upbeat jobs report, reaction to Senate’s passage of stimulus awaited.
• China’s Trade Balance jumped 60% during January-February, no major data/events up for publishing in Asia.

NZD/USD stays mostly unchanged from Friday’s closing near 0.7170, keeping bounce off yearly low flashed in January, during the initial Asian session on Monday. The quote dropped to the multi-day low of Friday as US employment data bolstered greenback bulls. However, the market is yet to respond to the weekend news suggesting the passage of coronavirus (COVID-19) stimulus passage by the US Senate as China’s trade numbers test the pair sellers.

Reaction to China Trade Balance, US Stimulus eyed …

Having slipped to the multi-day low during Friday, in an initial reaction to the upbeat US employment data for February, NZD/USD bounced off afterward as equities cheered the 389K Nonfarm Payrolls and 6.2% Unemployment Rate from the world’s largest economy. The US data also probed the US Treasury yields near February 2020 high even as bond bears cheer reflation fears.

It should, however, be noted that the weekend headlines conveying the much-awaited passage of US President Joe Biden’s $1.9 trillion covid stimulus by the Senate are yet to move to markets. As the news suggests heavy inflow of the funds, indirectly fueling the relfation fears, the US Treasury yields can stay strong and help the US dollar bulls to keep the reins.

On the contrary, strong outcomes of China’s January-February trade numbers challenge the NZD/USD bears. As per the latest data, the headline Trade Balance in the US dollar terms grew to $103.25B versus the $60B forecast whereas Exports and Imports rallied beyond 15% and 38.9% market consensus to 22.2% and 60.6% respectively.

It’s worth mentioning that comments from Chinese Foreign Minister Wang Yi, published via Bloomberg during the weekend, may exert additional downside pressure on the NZD/USD as the same suggests an escalation of the US-China tension. During his annual news briefing on Sunday, the Chinese diplomat urged the US, per the news, to “stop crossing lines and playing with fire” on Taiwan.

Looking forward, light in Asia will keep risk catalysts on the driver’s seat. Hence, NZD/USD traders should keep their eyes on the US Treasury yields and the US dollar moves for the fresh direction.

Technical analysis

With a clear break of 0.7215-20 confluence comprising one-year-old support line and 50-day SMA, NZD/USD remains vulnerable to visit 100-day SMA around 0.7070.