NZD/USD seesaws near five-week low under 0.6900 ahead of China PMI

• NZD/USD bears take a breather following the heaviest daily plunge in six weeks.
• Risk-off mood weighs on the Antipodeans, NZ covid news adds to the pair’s weakness.
• RBNZ is in focus but Fed tapering, China and Evergrande are the keys for now.
• China PMIs may disappoint but qualitative factors are more important for fresh impulse.

NZD/USD seesaws around the late August low, close to 0.6870 amid Thursday’s initial Asian session, following the biggest slump since mid-June the previous day. That said, the Kiwi pair had to bear the burden of the broad risk-off mood, in addition to the coronavirus bad news at home, while declining to the multi-day low with a strong push toward the south.

With the COVID-19 outbreak in Auckland questioning the recently eased alert level, New Zealand Prime Minister (PM) Jacinda Ardern will have to rethink her decision during Monday’s appearance, which in turn should raise bars for the Reserve Bank of New Zealand’s (RBNZ) rate hike. Considering this, the Australia and New Zealand Banking Group (ANZ) said, “The RBNZ has a difficult decision to make at its Monetary Policy Review next week. Some households and businesses, particularly those in Auckland, are still really feeling the pain of renewed lockdown measures.”

Other than the challenges to the RBNZ rate hikes, sour sentiment also drowned the NZD/USD prices the previous day. The Fed's tapering concerns, China’s economic woes and indecision over the US debt limit extension, not to forget the infrastructure spending bill, mainly contributed to the risk aversion wave.

Fed Chairman Jerome Powell defends his push for scaling back the easy money while teasing a fight against heating inflation, despite terming it “transitory”. The Fed leader hints that the world’s largest economy is ready for taper, hinting at firmer jobs report.

Fitch joined the global rating agencies and banks to cut the dragon nation’s credit rating. Further, Evergrande missed another bond coupon payment to enjoy the 30-day grace period, making conditions murkier.

Furthermore, the US Senators keep jostling over the US stimulus and debt ceiling extension in the Senate even as President Joe Biden canceled the Chicago trip to placate the opposition. Recently, US Senator Joe Manchin, a moderate Democrat criticized the infrastructure spending bill in the House.

Talking about the data, US Pending Home Sales for August came in better on MoM but eased on YoY whereas New Zealand Building Permits rose past 2.3% forecast to 3.8% for August.

Amid these plays, the US Treasury yields to refresh the highest levels in 15 weeks, before easing to 1.54%, favoring the US Dollar Index (DXY) to flash the heaviest daily jump since mid-June to print a one-year high. However, the Wall Street benchmarks closed mixed.

Moving on, China’s official PMIs will precede Caixin Manufacturing PMI to direct immediate NZD/USD moves. Forecasts suggest that NBS Manufacturing PMI may remain unchanged at 50.1 while the Caixin figure is expected to rise from 49.2 to 49.5. It’s worth noting that a positive surprise may offer a short-term bounce but not affecting the overall bearish trend ahead of the next week’s RBNZ.

Technical analysis

Given the NZD/USD pair’s daily close below July’s low of 0.6881, the 0.6850 level becomes the only bump before dragging the quote to the yearly bottom surrounding 0.6800.