NZD/USD surrenders a major part of its intraday gains amid stronger USD

• NZD/USD struggled to capitalize on the upbeat NZ GDP-led intraday positive move.
• A strong pickup in the USD demand prompted some fresh selling at higher levels.
• COVID-19 woes/cautious mood acted as a headwind for the perceived riskier kiwi.
• Investors now look forward to the US macro releases for a fresh trading impetus.

The NZD/USD pair erased a major part of its intraday gains and was last seen hovering just a few pips above daily swing lows, around the 0.7110 region.

The pair built on the overnight bounce from two-week lows and gained some positive traction during the Asian session on Thursday after New Zealand’s economic growth data smashed expectations. Following a 1.4% rise in the March quarter, the economy expanded by 2.8% during the second quarter of 2021 and raising odds for an interest rate hike next month. This, in turn, was seen as a key factor that pushed the NZD/USD pair back closer to key resistance near mid-0.7100s.

The positive momentum, however, lacked any follow-through, instead ran out of steam amid resurgent US dollar demand. Despite signs of easing inflationary pressures in the US, investors still believe that the Fed would begin rolling back its massive pandemic-era stimulus later this year. This, along with a modest uptick in the US Treasury bond yields, underpinned the USD. Apart from this, the prevalent cautious mood further acted as a headwind for the perceived riskier kiwi.

Investors remain worried about the fast-spreading Delta variant and a global economic slowdown. The market concerns resurfaced after Wednesday's disappointing Chinese macro data, which underscored recent signs of slackening economic momentum in the world's second-largest economy. The fundamental backdrop supports prospects for further losses, though bearish traders are likely to wait for some follow-through selling below the overnight swing lows before placing fresh bets.

Market participants now look forward to the US economic docket, highlighting the releases of monthly Retail Sales, Philly Fed Manufacturing Index and the usual Weekly Initial Jobless Claims. The data, along with the US bond yields, could influence the USD price dynamics and provide some impetus to the NZD/USD pair. Apart from this, traders might further take cues from the broader market risk sentiment to grab some short-term opportunities around the major.

Technical levels to watch