NZD/USD justifies upbeat New Zealand data, China news to please buyers above 0.6200

• NZD/USD begins trading week on a positive footing despite inactive markets.
• Business NZ PSI improves for May allowing Kiwi buyers to keep the reins.
• US-China talks, stimulus news from Beijing underpin cautious optimism.
• Juneteenth holiday restricts trading volatility, Fed Chair Powell’s Testimony will be the key.

NZD/USD appears the most active among the G10 currency pairs during early Monday morning in Asia, up 0.35% intraday to 0.6235 at the latest. In doing so, the Kiwi pair benefits from upbeat New Zealand (NZ) data and risk-on mood, mainly backed by China news, even as the Juneteenth holiday restricts the market moves.

New Zealand’s Business NZ PSI for May improves to 53.3 versus 49.4 prior and contrasts with the previous week’s Business NZ PMI for the said month, as well as mixed NZ Gross Domestic Product (GDP) for the first quarter (Q1) 2023 to favor the NZD/USD bulls.

On the same line, the latest headlines surrounding China allowed markets to remain hopeful and propel the Kiwi pair price.

US Secretary of State Antony Blinken and Chinese Foreign Minister Qin Gang on Sunday held what both called candid and constructive talks on their differences from Taiwan to trade but seemed to agree on little beyond keeping the conversation going with an eventual meeting in Washington, reported Reuters. Further, news from the South China Morning Post (SCMP) quoting China State Council also flashes positive signals for the sentiment as it said, “The Council considered a batch of macroeconomic policies designed to expand ‘effective demand’, strengthen the real economy and defuse risks in key areas.”

It’s worth noting that the US Dollar Index (DXY) failed to cheer the US Federal Reserve’s (Fed) hawkish pause to the rate hike trajectory as mostly downbeat data challenged hopes of the US central bank’s rate hike past July.

That said, the preliminary readings of the University of Michigan (UoM) Consumer Sentiment Index (CSI) for June improved but the US inflation expectations eased and tamed the US Dollar bulls. Further, Fed policymakers have been hawkish of late and challenged the NZD/USD bulls.

Alternatively, the latest US Federal Reserve (Fed) Monetary Policy Report to the US Congress, published Friday stated, “Inflation in the US is well above target and the labor market remains very tight,” as per Reuters. The report also mentioned, per Reuters, “Outlook for funds rate is subject to considerable uncertainty.”

Further, Richmond Fed President Thomas Barkin said, “Raising rates further could create the risk of a more significant slowdown in the economy.” The policymaker, however, also added that the Fed can do comfortable more to slow the resilient US economy, which in turn triggered a jump in the 2-year Treasury bond yields to 4.75% and helped the US Dollar to get off the lows.

On the same line, “US economy is still ‘ripping along’,” said Federal Reserve Governor Christopher Waller on Friday while adding that everything seems to be calm in the US banking system, as reported by Reuters.

Looking ahead, a light calendar and Juneteenth holiday can restrict immediate NZD/USD moves but the buyers may remain hopeful amid firmer sentiment and broad US Dollar weakness. That said, Fed Chairman Powell’s testimony, as well as PMIs for June, will also be important to watch for clear directions.

Technical analysis

NZD/USD seesaws around the 200-day Exponential Moving Average (EMA) level of around 0.6230 as bulls seek a sustained break of the key EMA to register further advances.