NZD/USD sticks to modest intraday gains above 0.6200, lacks follow-through

• NZD/USD gains some positive traction for the second successive day on Thursday.
• New Zealand’s trade data lends support to the NZD amid subdued USD demand.
• Powell’s less hawkish remarks on Wednesday keep the USD bulls on the defensive.

The NZD/USD pair trades with a positive bias for the second successive day on Thursday and is currently placed near the top end of its daily range, just above the 0.6200 round-figure mark.

The New Zealand Dollar (NZD) drew some support from the domestic trade balance data, which showed that exports to China increased by 18% in May. This helps ease jitters over the Chinese economy and largely overshadows the fact that New Zealand’s trade deficit widened from NZ$ 17.02 billion to NZ$ 17.12 billion. Additional details showed that the monthly trade surplus narrowed from NZ$ 236 million to NZ$ 46 million in May against a deficit of N$ 350 million anticipated. Apart from this, subdued US Dollar (USD) price action lends some support to the NZD/USD pair.

In fact, the USD Index (DXY), which tracks the Greenback against a basket of currencies, languishes near the monthly low and is pressured by Federal Reserve (Fed) Chair Jerome Powell's less hawkish comments on Wednesday. Testifying before the House Financial Services Committee on Wednesday, Powell noted that inflation remains very far from the Fed's target, though it may make sense to raise rates at a more moderate pace. Powell, however, added that the fight against inflation is still not over and despite a recent pause, officials agreed borrowing costs would likely need to move higher

This pushes back against market expectations that the US central bank is nearing the end of its year-long policy tightening cycle and lends some support to the USD. Apart from this, worries about a global economic downturn benefits the Greenback's relative safe-haven status and contributes to capping the upside for the risk-sensitive Kiwi, at least for the time being. This makes it prudent to wait for strong follow-through buying before placing bullish bets around the NZD/USD pair and positioning for any further intraday appreciating move ahead of Powell's second day of congressional testimony.

Technical levels to watch