NZD/USD struggles to extend recovery moves beyond 0.6600 after New Zealand trade data

• NZD/USD keeps the late-US session bounce off 0.6625.
• New Zealand Trade Balance in June recovered from $-1.29B to $-1.2B on YoY.
• Market sentiment sours amid escalating tension between the US and China, odds of delay in the US fiscal stimulus.
• Preliminary readings of monthly PMI from Australia and the US, coupled with risk catalysts, will be in the focus for now.

NZD/USD confronts with the bears while rising to 0.6640 during the early Asian session on Friday. In doing so, the pair defies Thursday’s halt to the five-day winning streak amid upbeat yearly Trade Balance figures. However, challenges to the market’s risk-tone sentiment guard the pair’s immediate upside.

New Zealand’s June month trade numbers suggest a mixed move as the headline Trade Balance recovered from  $-1.29B to $-1.2B on YoY but slipped below $450M monthly forecast to $426M. Further details suggest that the Imports have grown from $4.11B prior to $4.64B whereas Exports slipped from $5.4B previous readouts to $5.07B.

Risk-off is the key…

With the surge in the Sino-American tension, risk-tone sentiment dwindles. Also increasing the worries could be the recent speculations that the much-awaited US fiscal package will take a bit longer to cross the wires.

Following the fiery speech by US Secretary of State Mike Pompeo, President Donald Trump said, “trade deal with China means much less to me now than it did.” In a reaction, kind of, China’s Global Times (GT) quotes analysts that raise possibilities of expelling the US consular spies from the dragon nation.

Other than the tit-for-tat between the world’s two largest economies, headlines from the Financial Times (FT), suggesting a delay in the American phase 4 aid package, also weighs on the risk-tone sentiment.

Furthermore, downbeat US data and coronavirus (COVID-19) worries of Washington and Canberra also hammer the market sentiment and weighs on the Antipodeans, including the New Zealand dollar (NZD).

Amid all these catalysts, Wall Street turned red for the first time in five days by the end of Thursday but S&P 500 Futures flash 0.15% gains to 3,235 by the press time.

Moving on, the kiwi pair traders will keep eyes on the preliminary activity data from Australia and the US for immediate direction. Though, it doesn’t mean that the headlines concerning the US-China tussle and US budget, not to forget the virus updates, will lose their importance in diverting the moves.

Considering all these, analysts at the Australia and New Zealand Banking Group (ANZ) said, “With global drivers in the driving seat, we remain attuned more to general market conditions and liquidity, all of which points to the Kiwi being well bid on dips. Markets remain ‘priced for perfection’, which suggests a degree of fragility, as last night’s price action demonstrates. Still, liquidity remains abundant and markets remain more embracing of good news stories, and that ‘vibe’ is good, rather than bad for NZD.”

Technical analysis

Bears are likely to step forward on the clear break below 0.6600 while targeting June month’s top near 0.6585 and 21-day SMA surrounding 0.6550/45. On the contrary, the pair’s upside will continue to be challenged by 0.6700 threshold before the yearly top near 0.6745.