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    Soft Chinese data undermines the kiwi’s recent success

    NZDUSD’s recent drive higher ran out of steam in Asia, with the pair now looking a little shaky. Part of today’s weakness can be attributed to softer than expected manufacturing numbers from China, with HSBC’s February Manufacturing PMI coming in at 49.2, significantly below expectations of 50.5 and the prior moth’s 50.7. The index is now at its lowest level in 11 months as concerns about the health of China’s manufacturing sector mount.

    This recent bout of soft domestic data from China raises questions about the effectiveness of recent stimulus to spur the economy and adds weight to our underwhelming forecast for GDP this quarter (figures are due out in mid-April). Nonetheless, Beijing still has a lot of room to loosen policy further if needed, which we suspect it will, which should see China grow at around target this year. China has already tried small fiscal stimulus and monetary policy loosening, both of which we expect to see more of in coming months/ quarters.

    Tech look NZDUSD

    NZDUSD is facing multiple periods of bearish divergence between price and RSI. This may be an indicator that price is near its short-term high, but it’s not a confirmation. At present price is testing its 100-day SMA; a break back below this level would be bearish in our opinion, at least in the near-term. However, the kiwi’s fundamentals are better than most other major currencies against the dollar.



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