NZD/USD trades around 0.63 as focus shifts to US-China trade talks

• Investors stay on the sidelines while waiting for trade headlines.
• US Dollar Index struggles to recover last week’s losses.
• The market action is likely to remain subdued in the remainder of the day.

After posting small weekly gains and closing above the 0.63 mark last week, the NZD/USD pair came under modest selling pressure on Monday and is now trading at 0.6298, erasing 0.3% on a daily basis.

Attention turns to trade developments

Investors seem to be refraining from making large bets while waiting for the outcome of this week’s high-level United States (US) – China trade talks in Washington. Ahead of the critical negotiations, Bloomberg over the weekend reported that  China’s Vice Premier Liu He wouldn’t offer commitments on reforming Chinese industrial policy or the government subsidies despite the US’ requests and weighed on trade-sensitive antipodeans, the NZD and the AUD.

Previewing this event,  “Focus this week will turn to the 13th round of high-level trade talks between the US and China taking place in Washington on Thursday and Friday,” noted Danske Bank analysts. “If we get an interim deal we expect a short-term relief in equity markets, see  US-China Trade – 60% probability of an interim deal, 2 October 2019.”

On the other hand, the US Dollar Index is having a difficult time recovering last week’s losses as the heightened probability of the Federal Reserve opting out for one more 25 basis point rate cut at the end of this month following the disappointing macroeconomic data releases hurts the demand for the Greenback.

As of writing, the index was down 0.07% on the day at 98.77. There won’t be any significant macroeconomic data releases from the United States in the remainder of the day and the pair is unlikely to break out of its daily range.

Technical levels to watch for