New Zealand Kiwi Softens On China Deflation Pressure

Fundamental Analysis

* Deflation Drag: The New Zealand Dollar remains under pressure against the U.S. Dollar, as a stronger greenback and concerns over deflation in China weigh on the Kiwi. On the U.S. side, Federal Reserve officials have maintained a cautious approach this year due to inflation risks and uncertainties under the new Trump administration, which bolsters support for the U.S. Dollar. Several Fed members indicated that the central bank would slow the pace of rate cuts in 2024 after implementing reductions at its last three meetings. In China, deflationary pressures persist despite months of policy measures aimed at boosting demand. The Consumer Price Index (CPI) rose by just 0.1% year-on-year in December, while the Producer Price Index (PPI) fell 2.3% year-on-year, marking 27 consecutive months of decline. This adds selling pressure to the Kiwi, given China’s significance as a key trading partner for New Zealand.

Technical Analysis

*Technical Breakout: NZDUSD was traded lower while currently testing near the support level 0.55850. MACD which illustrate bearish momentum signal suggest the pair to likely extend its losses.

* Resistance and Support: If the bearish momentum persists, there’s a strong likelihood that the price will potentially head towards the level 0.55000 after it breach below the level 0.55850. Conversely, a potential reversal is also to be expected and the price could head back towards 0.56700.

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Potential Risks

Looking ahead, the focus will shift to the U.S. December employment data, set to be released later Friday. Key highlights include Nonfarm Payrolls (NFP), the Unemployment Rate, and Average Hourly Earnings.

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Monitoring

Stay updated on US, New Zealand data, central bank updates and any shifts in the US Dollar’s strength by following PU Prime’s market insights and daily financial news.

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Disclaimer: Trading derivatives involves high risks, and market conditions can change rapidly. The content is for informational purposes only and should not be considered as financial advice. Traders should conduct their own research and consider risk management strategies.