New Zealand Dollar, NZD/USD, Commodities, China, Economic Data – Talking Points
- APAC markets brace for volatility as fighting around Kyiv intensifies
- China set to report economic data amid renewed wave of Covid lockdowns
- NZD/USD falls near its 50-day Simple Moving Average as bears advance
Tuesday’s Asia-Pacific Outlook
Asia-pacific markets may decline today after US stocks gave up gains and ended negative in Wall Street trading overnight. Diplomatic talks were paused on Monday between Russian and Ukrainian negotiators while fighting intensified in and around Kyiv, Ukraine’s capital city. Negotiations are set to continue tomorrow, according to Ukraine’s Mykhailo Podolyak. US officials met with Chinese counterparts in Rome to discuss the situation in Ukraine amid China’s reluctance to condemn Russia.
The New Zealand Dollar fell versus the US Dollar during New York trade, likely due to the broad selloff seen across commodities. Industrial metals, including iron ore and platinum, fell with agricultural products. European natural gas prices were down than 10% lower this morning. Brent crude oil prices were almost 6% lower, mirroring a similar loss in WTI crude prices. The hopeful attitude around a potential ceasefire in Ukraine may have scrubbed some of the geopolitical risks from oil prices.
However, the more likely reason for oil’s pullback is the newly instituted round of lockdowns across Chinese coastal cities. Shenzhen, a major Chinese production hub, started a one-week lockdown on Monday in response to a Covid outbreak in the city over the weekend. That has reignited global supply-chain fears at a time when inflation continues to grow. The lockdowns may also sap some economic demand and blunt global GDP growth, especially if China fails to contain the current outbreaks.
This morning, New Zealand’s performance of services index (PSI) for February remained in contraction at 48.6, although that is up from 45.7, marking an improvement. The Reserve Bank of Australia’s latest meeting minutes will cross the wires. China is also set to report fixed asset investment, industrial production and retail sales for the January to February period. Industrial production growth is expected to slow to 3.9% year-over-year from 5.0% due to the Chinese New Year and 2022 Winter Olympic Games. Alternatively, analysts see retail sales improving to 3.0% y/y from 1.7% y/y. The Australian Dollar may move on any surprises in the data relative to expectations.
NZD/USD Technical Forecast
NZD/USD’s drop overnight has prices approaching the 50-day Simple Moving Average (SMA), which could underpin the recent drop. A break lower would see bears target the 61.8% Fibonacci retracement level from the January/March move. Alternatively, a rebound would face intermediate Fibonacci support before attacking the high-profile 200-day SMA that bulls failed to overcome earlier this month. The 0.6800 level may also pose some resistance should prices rise.
NZD/USD Daily Chart
Chart created with TradingView
— Written by Thomas Westwater, Analyst for DailyFX.com
To contact Thomas, use the comments section below or @FxWestwater on Twitter