NZD/USD retraces from one-week top to mid-0.6400 ahead of China data

• NZD/USD keeps the late-US session range between 0.6450 and 0.6560.
• New Zealand’s Building Permits for May surprisingly grew 35.6% versus -0.1% forecast.
• Market sentiment remains mildly positive despite virus woes, hopes of escalation in the US-China tussle.
• China’s Caixin Manufacturing PMI could offer immediate direction, risk catalysts also become the key ahead of a busy US calendar.

NZD/USD pays a little heed to the recently flashed New Zealand Building permits while taking rounds to 0.6450 during the initial Asian session on Wednesday. Even so, the kiwi pay stays near the one-week high while carrying the previous day’s upbeat performance amid risk-on sentiment.

New Zealand’s Building Permits surged 35.6%, compared to -0.1% forecast and -9.9% revised prior, during May month. The figures failed to offer any major moves to the pair traders considering the recovery from the coronavirus (COVID-19)-led slump in housing data. An additional catalyst for the pair’s lack of reaction to the data could be traced from the risk reset during the early hours of trading.

The quote earlier cheered Wall Street gains and also followed the rise of the US 10-year treasury yields while positing the biggest gains in over a week. Though, the S&P 500 Futures, currently down 0.10% to 3,081, seems to part ways from the US session’s play. The reason for Tuesday’s broad risk-on mood largely took clues from the quarter-end rebalancing and signs of further stimulus from US Treasury Secretary Steve Mnuchin, not to forget upbeat US data. However, the recent escalation of tension between the US and China, following the passage of Hong Kong security law by Beijing, seems to have weighed on the market’s risk-on sentiment. Additionally, the rising virus numbers from America continues to play against the previous optimism.

Other than US President Donald Trump’s direct attack on China, the dragon nation’s efforts to stop unilateral sanctions on Iran, at the United Nations, also portray the Sino-American tussle. Elsewhere, Texas registers another daily record addition into the pandemic cases, by 6,975, with hospitalization also rising by 620. Further, California also crosses the seven-day average rise of 2.8% with a 2.9% hike in cases.

The recent risk reset might keep the traders entertained ahead of the busy US session comprising FOMC minutes, ISM Manufacturing PMI and ADP Employment Change. However, China’s Caixin Manufacturing PMI, expected 50.5 versus 50.7 prior, could offer extra directives to the traders. Should the activity gauge follow the official prints, the quote might extend its recent upward trajectory to attack 0.6500 mark.

Technical analysis

The pair’s sustained trading beyond 21-day EMA enables the bulls to aim for a three-week-old resistance line, at 0.6500 now, during the further upside. Meanwhile, June 22 low and 200-day EMA, respectively around 0.6380 and 0.6325, will offer strong downside support past-21-day EMA level of 0.6408.