• NZD/USD jumps above 0.5650 after China vowed to boost private consumption.
• Investors await China’s official business activity data for December.
• The RBNZ is expected to cut interest rates by 50 bps in February.

The NZD/USD pair climbs to near 0.5660 in Monday’s European session. The Kiwi pair gains sharply after the Chinese government announced measures to boost private consumption. China’s central government stated that it would offer handouts to people struggling with the cost of living and vowed more benefits for some unemployed people, Xinhua News agency reported.

Going forward, investors will focus on China’s National Bureau of Statistics (NBS) Manufacturing and Non-Manufacturing Purchasing Managers’ Index (PMI) data for December, which will be released on Tuesday. The economic data is expected to show that the Manufacturing PMI expanded steadily to 50.3, while the non-manufacturing output grew slightly faster to 50.2.

Being a close trading partner of China, the New Zealand Dollar (NZD) is impacted by Chinese economic activity data.

However, the broader outlook for the Kiwi dollar remains weak. Investors are confident that the Reserve Bank of New Zealand (RBNZ) will cut its Official Cash Rate (OCR) again by 50 basis points (bps) to 3.75% in the February policy meeting.

Meanwhile, the US Dollar (USD) drops on a broadly quiet trading day ahead of New Year celebrations. The US Dollar Index (DXY), which tracks the Greenback’s value against ix major currencies, falls to near 107.85.

NZD/USD finds a temporary cushion near the two-year low of 0.5520 on a weekly timeframe. The outlook of the Kiwi pair remains bearish as the 20-week Exponential Moving Average (EMA), which trades around 0.5900.

The 14-week Relative Strength Index (RSI) slides to near 30.00, suggesting a strong bearish momentum.

If it breaks below the psychological support of 0.5500, the Kiwi pair could decline to near the 13-year low of 0.5470 and the round-level support of 0.5400.

On the other hand, a decisive break above the November 29 high of 0.5930 could drive the pair to the November 15 high of 0.5970 and the psychological resistance of 0.6000.

NZD/USD weekly chart

(Click on image to enlarge)

More By This Author: