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A recovery attempted by NZD/USD looks less confident as investors are losing hope in China’s economic recovery.
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Investors should be prepared for sheer volatility ahead of the release of the US inflation data.
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A successful breakdown of the Rising Channel pattern has pushed the Kiwi asset into a bearish trajectory.
The NZD/USD pair attempted a recovery move after printing a fresh two-week low near 0.6170. The New Zealand dollar’s recovery move appears less confident as investors lose hope of an economic recovery in China despite the administration’s dismantling of lockdown restrictions.
The Chinese economy is in a passive mode despite various stimulus announcements to boost aggregate demand. On Tuesday, agencies reported monthly inflation in the Chinese economy of 0.3% while the Street was expecting goods and services prices to accelerate by 0.1%. Annual inflation eased to 0.7% from the previous release of 1.0%.
It is worth noting that New Zealand is one of China’s major trading partners and weak Chinese demand will also affect the New Zealand dollar.
Investors should brace for sheer volatility ahead of the release of US inflation data. Meanwhile, S&P500 futures added some early gains in Asia after rangebound on Tuesday, indicating an improvement in market sentiment. The US Dollar Index (DXY) will likely test the immediate cushion of 102.00.
A successful breakout of the rising channel chart pattern on the four-hour scale pushed the Kiwi asset into a bearish trajectory. The 20-period exponential moving average (EMA) at 0.6229 is acting as a barrier for New Zealand dollar bulls. Potential horizontal support is plotted at the March 08 low at 0.6084.
The Relative Strength Index (RSI) (14) has moved into the bearish range of 20.00-40.00, indicating that downward momentum has begun.
More weakness will be witnessed if the Kiwi asset surrenders April 11 low near 0.6170, which will drag the major to March 15 low at 0.6139 followed by March 08 low at 0.6084.
Alternatively, a decisive upside move above February 07 high at 0.6363 will expose the Kiwi asset to the round-level resistance at 0.6400 and December 05 high at 0.6443.
NZD/USD four-hour chart
NZD/USD
