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Data from Asia leave NZD exposed

Summary:

  • Mixed data from China, soft readings from New Zealand take a toll on the NZD - the weakest G10 currency today
  • Solid capex report from Australia supports AUD amid strong USD
  • NZDUSD could be headed below 0.70

Thursday is full of macroeconomic reports and many have been already released in Asia. The most anticipated were flash PMI indices in China that have send a mixed message. Manufacturing PMI inched up from 51.4 to 51.7 pts., above expectations of 51.3 pts. which is a good sign. However, non-manufacturing PMI slid from 54.5 to 53.4 pts., more than outweighing improvement in manufacturing. One could suspect that large manufacturing companies are prospecting amid a flood of credit that is still broad while a transition towards a consumer based economy is facing hurdles. 

That’s a tough nut for other Asian economies and unsurprisingly NZD has been under pressure, especially as domestic data deteriorated as well. ANZ activity outlook for August slipped from 40.3 to 38.2. pts. while Business Confidence declined from 19.4 to 18.3 pts.

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Capital expenditures are no longer in decline in Australia, but what will happen if the current rally in industrial commodities ends? Source: Macrobond, XTB Research 

AUD is also under water today vs the greenback but it’s at least holding its own against other currencies, especially NZD. This relative strength is a result of solid capex report that was published overnight. The Q2 capex increased 0.8%, more than expected (0.2%) - a good news ahead of the GDP report next week. Private capex was in line with expectations at 0.5% which means that an improvement in the data was caused by the public sector.

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NZDUSD could be aiming at a lower limit in an upward channel. Source: xStation5 

Taking a look on the charts, a momentum is clearly with the bears on NZDUSD.  While on a long-term time frame the pair remains in an upward trend it has been in a very dynamic correction recently after failing to crack 0.75. A lower limit of an upward channel could be the target for sellers and currently it runs around 0.6970. 

 

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