Daily brief: US dollar pullback as APAC traders’ eye Australian trade data

Asia-Pacific markets look set for a bright trading session after US stocks broke a two-day losing streak overnight in New York trading. A better-than-expected purchasing managers’ index (PMI) report from the Institute for Supply Management (ISM) helped to dispel fears of an economic recession. St. Louis Federal Reserve President James Bullard, in a CNBC interview, said the strong jobs market makes it unlikely that the US is in a recession despite two quarters of GDP declines.

The New Zealand dollar rose against the safe-haven US dollar even after New Zealand’s second-quarter jobs report disappointed expectations. The island nation’s Q2 job growth crossed the wires at 0% on a quarter-over-quarter basis against an expected 0.4% q/q increase. That likely wasn’t enough to derail RBNZ rate hike bets for August, with rate markets still showing an almost 100% chance for a 50-basis-point rate hike. However, it could force the central bank to tone back on the hawkish rhetoric, posing a potential headwind to the Kiwi dollar.

Market sentiment should hold firm in today’s session, with Australia’s trade data posing the only threat on a spare economic calendar. Economists see a A$14 billion surplus for June, slightly lower from May’s A$15.96 billion surplus. The Australian dollar may fall on a weaker reading. The Philippines retail price index for May is set to cross the wires as well.

Geopolitical risks receded after US House Speaker Nancy Pelosi left Taiwan, concluding a high-stress visit that brought a strong response from China. Beijing warned against the visit, stating that it was an act that would destabilize relationships. China is expected to conduct military exercises this weekend, which could see those geopolitical risks return to the market.

NZD/USD technical outlook

NZD/USD found support at the 26-day Exponential Moving Average and a supportive trendline from the July swing low. Intraday moves over the last few weeks saw the 20-day Simple Moving Average support prices. If those support levels hold, prices will face the August high at 0.63525. A break lower, however, would expose the July low at 0.6058. The MACD is headed lower toward its midpoint while RSI trades around its respective midpoint.

NZD/USD eight-hour chart

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