NZD/USD: Bears the burden of China-led pessimism near 0.6385 with eyes on RBNZ

• NZD/USD could neither cheer China’s CPI nor benefit from New Zealand Truckometer.
• Expectations that the RBNZ could highlight fears of coronavirus weigh on the pair.
• Fed Chair Powell’s testimony will be the key to watch while updates from China could continue to play their roles.

NZD/USD remains under pressure around 0.6384 during the early Asian session on Tuesday. The kiwi pair seesaws around three-month low, flashed Monday, amid growing pessimism that China’s coronavirus will push the RBNZ towards bearish bias.

Tales surrounding Coronavirus keep the bears happy…

The reopening of Chinese production plants fail as well as stronger CPI since October 2011 fail to please commodity-linked currency buyers amid calls that the epidemic would last long. Earlier during Monday, China’s CPI offered pullback to the kiwi but buyers couldn’t be lured as markets worry that the coronavirus will still be ruling for a bit more time.

The epidemic has already crossed the year 2002-03 SARS contagion with the latest death toll rising beyond 1000 mark.

Even if the recently-released numbers show signs of exhaustion, doubts are high that the increase will resume as soon as more people return to work.

RBNZ cannot ignore China…

Given New Zealand’s economic reliance on China, the Reserve Bank of New Zealand (RBNZ) might not choose to ignore pessimism at its key customer.

Even so, the central banker should not ignore fundamental strength at home, recently cited by the January month ANZ Truckometer data, during Wednesday’s meeting.

“We expect the RBNZ to retain an easing bias at its Monetary Policy Statement on Wednesday, although it will probably be described as a conditional one, dependent on the impact of the coronavirus pandemic,” says Westpac.

Before the RBNZ, the Fed Chair Powell’s testimony will be the key to watch. While the current pessimism due to coronavirus will push the Fed supremo towards being cautiously optimistic, his comments over the US economic growth and future Fed actions will be closely observed.

Technical Analysis

Unless prices bounce beyond last Tuesday’s low near 0.6445, their further declines to November 2019 bottom surrounding 0.6315 can’t be ruled out.