NZD/USD unfazed by trade data as APAC markets eye China lending rate

Monday’s Asia-Pacific forecast

Asia-Pacific traders have a light economic docket this week. That may leave prevailing risk-on trends intact. Asian and US equity markets are coming off strong performances. Hong Kong’s Hang Seng Index (HSI) gained more than 4% last week despite falling on Friday. The US benchmark S&P 500 index rose an impressive 6.16%, the best weekly performance since 2020. The DXY US dollar index shed nearly 1%, even as short-term Treasury yields climbed. Euro strength was a large driver of that weakness.

That risk-on tone helped propel the Australian and New Zealand dollar higher versus the safe-haven USD. Those currencies have been underpinned by the rise in commodity prices amid Russia’s invasion of Ukraine. Other commodity-exporting countries' currencies have also benefited since the start of the war, including the Brazilian real. Brazil’s central bank hiked its benchmark rate by 100 bps last week. Despite the recent pullback in oil prices, WTI and Brent crude remain near multi-year highs, which should continue to underpin currencies from commodity-exporting countries, especially oil exporters.

New Zealand reported trade data for February this morning. The island nation’s trade deficit crossed the wires at NZ$-385 million, down from NZ$-1.1 billion in January. A pickup in exports helped to shrink the shortfall. Later today, credit card spending for February and Westpac consumer confidence for the first quarter will cross the wires, which may spur some movement in the Kiwi dollar. It rose over 1.5% last week, despite fourth-quarter GDP growth missing estimates.

China may deliver a cut to its loan prime rate (LPR) as soon as today. The People’s Bank of China (PBOC) is expected to cut the benchmark lending rate by 5 to 10 basis points (bps). The move may boost market sentiment, although there is a small chance that the rate is held steady after last week’s surprise hold on the medium-term lending facility rate. Outside the APAC region, traders will be watching inflation data out of the United Kingdom as well as "Fedspeak": comments from Chair Powell and Atlanta Fed Raphael Bostic are due. These headlines may spur movement in the British pound and the US dollar.

NZD/USD technical forecast

NZD/USD is nearly unchanged this morning, with prices directly below the high-profile 200-day Simple Moving Average (SMA). A break above the key SMA would put prices up against the 2022 high set earlier this month at 0.6925. The 0.7000 psychological level would shift into focus if bulls managed to overtake those levels. Alternatively, a move lower could see bears drive the currency pair down to the 23.6% or 38.2% Fibonacci retracement levels or the 0.6800 mark.

NZD/USD daily chart

Follow Thomas Westwater on Twitter @FxWestwater

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