NZD/USD licks its wounds around monthly low near 0.6200 ahead of US PCE inflation

• NZD/USD bounces off two-week low after better-than-previous China PMI data.
• NZ Business Confidence remains downbeat, RBNZ’s Conway failed to impress bulls.
• China’s NBS Manufacturing PMI eased below forecasts, Non-Manufacturing PMI came stronger.
• Risk-off mood challenges pair buyers ahead of Fed’s preferred inflation gauge.

NZD/USD bears take a breather around a fortnight's low after China’s monthly PMI data during Thursday’s Asian session. The kiwi pair initially dropped to the two-week low of 0.6198 before bouncing back to 0.6215. However, the risk-aversion wave and downbeat business confidence at home keep sellers hopeful.

China’s preliminary readings of official PMIs came in better than previous for May. That said, the headline NBS Manufacturing PMI rose to 50.2 versus 49.6 prior, versus 50.4 forecasts. Further, Non-Manufacturing PMI rallied to 54.7 versus 52.5 expected and 47.8 in previous readings.

At home, ANZ Business Confidence dropped to -62.6 versus -33.2 forecast and -55.6 prior whereas the ANZ Activity Outlook slipped below 1.7% forecast and -4.7% previous readings to -9.1% for June.

Earlier in the day, Reserve Bank of New Zealand (RBNZ) Chief Economist Paul Conway tried to defend the central bank’s hawkish bias while suggesting that it will help the domestic housing market. However, the policymaker failed to impress buyers amid macro fears of economic slowdown and a firmer US dollar.

“Policy tightening will likely see actual house prices move back towards sustainable levels more in line with market fundamentals,” said RBNZ’s Conway.

The risk-off mood could also be witnessed via the US stock futures and the Treasury yields. That said, S&P 500 Futures print a four-day downtrend while the US 10-year Treasury yields drop for the third consecutive day, down one basis point (bp) to 3.087% at the latest. It should be noted that Wall Street closed mixed the previous day even as central bankers reiterated their readiness to battle inflation, even at the cost of short-term economic slowdown.

Moving on, the Fed’s preferred inflation gauge, namely the Core Personal Consumption Expenditure (PCE) Price Index, for May, expected 0.4% MoM versus 0.3% prior, will be a crucial catalyst for the NZD/USD prices.

Technical analysis

A clear downside break of the seven-week-old horizontal support area, now resistance around 0.6215-20 keeps NZD/USD bears hopeful to refresh the yearly low.