NZD/USD flirts with the top end of over one-week-old trading range, around 0.6400 mark

The NZD/USD pair gains some positive traction during the Asian session on Tuesday, though struggles to capitalize on the move beyond the 0.6400 round-figure mark. Spot prices remain confined in a familiar trading range held over the past one-and-half week or so.

The better-than-expected Chinese economic data fueled optimism over a recovery in the world's second-largest economy and lends some support to the NZD/USD pair. In fact, China's recorded a  growth of 2.9% during the fourth quarter and Industrial Production surpassed estimates. Furthermore, Retail Sales shrank less than anticipated and pointed to a positive trend among consumers.

That said, the worst yet COVID-19 outbreak in China continues to weigh on investors' sentiment. This is evident from a softer tone around the equity markets, which benefits the safe-haven US Dollar and acts as a headwind for the risk-sensitive Kiwi. This, in turn, warrants some caution for aggressive bullish traders and positioning for any meaningful appreciating move for the NZD/USD pair.

The USD uptick, meanwhile, is more likely to remain capped amid growing acceptance that the Fed will soften its hawkish stance amid signs of easing inflationary pressures. Moreover, several Fed officials backed the case for smaller rate hikes and reaffirmed bets for a 25 lift-off in February. This should keep a lid on the buck and limit the downside for the NZD/USD pair, at least for now.

The mixed fundamental backdrop might hold back traders from placing directional bets around the NZD/USD pair and supports prospects for an extension of the range-bound price action. Moving ahead, Tuesday's US economic docket features the release of the Empire State Manufacturing Index. This, along with the broader risk sentiment, might influence the USD and provide some impetus.

Technical levels to watch