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  • China to release Industrial Production and Retails Sales data.
  • Hopes of progress in US-China trade talks help antipodeans find demand.
  • Broad USD strength limits pair’s upside on Wednesday.

The NZD/USD pair fluctuated sharply in the early trading hours of the American session on surprise headlines surrounding the US-China trade dispute but steadied  near the 0.6450 handle in the last hour and now remains on track to close the day flat ahead of critical macroeconomic data releases from China.

Following reports of a phone call between high level Chinese and American trade negotiators, the US Trade Representative’s office on Tuesday announced that the Trump administration has agreed to delay additional 10% tariffs on some Chinese products including a wide range of consumer electronics and revived hopes of the trade war coming to an end.  

NZD struggles to capitalize on trade optimism

With the initial market reaction, the trade-sensitive Kiwi gathered strength and lifted the pair to a daily high of 0.6470. However, this development was assessed as a factor that would allow the Federal Reserve to refrain from making a large rate cut in September and helped the Greenback outperform its rivals.

Moreover, the 10-year US Treasury bond yield gained traction on these headlines and rose more than 3% to support the dollar’s recovery. The US Dollar Index was last up 0.4% on the day at 97.80.

In the early trading hours of the Asian session, Retail Sales and Industrial Production data from China will be looked upon for fresh impetus. Markets expect Retail Sales to increase by 8.6% on a yearly basis in July and a stronger-than-expected reading could cause the pair to rally in the first half of the day on Wednesday.

Technical levels to watch for