NZD/USD sticks to gains near mid-0.6100s, remains below two-month high ahead of Fed's Powell

• NZD/USD attracts some dip-buying on Friday amid the dovish Fed-inspired USD weakness.
• The disappointing release of New Zealand Retail Sales data does little to hinder the move up.
• Traders now look forward to Fed Chair Powell's speech before placing fresh directional bets.

The NZD/USD pair regains some positive traction on Friday, albeit lacks follow-through and remains confined in a three-day-old range through the early European session. Spot prices currently trade around mid-0.6100s, well within the striking distance of over a two-month peak touched on Wednesday, as traders now look to Federal Reserve (Fed) Chair Jerome Powell's speech for a fresh impetus. 

Powell's remarks will be scrutinized for cues about the US central bank's policy path and whether a cooling labor market could force the Fed to announce a larger-than-normal, 50 basis points (bps) rate cut in September. The expectations were fueled by data released on Wednesday, which showed that US employers added 818K fewer jobs than reported during the year through March. Hence, the outlook will play a key role in influencing the near-term US Dollar (USD) price dynamics and determining the next leg of a directional move for the NZD/USD pair. 

In the meantime, growing acceptance that the Fed will begin its policy easing cycle next month and lower borrowing costs by 100 bps by the end of this year fails to assist the USD to capitalize on the overnight recovery from the YTD low. This helps offset weaker New Zealand data, showing that Retail Sales declined more-than-expected, by 1.2% QoQ in the second quarter as compared to a 0.5% increase in the previous quarter and acts as a tailwind for the NZD/USD pair. That said, a combination of factors might cap further gains for the currency pair. 

Against the backdrop of China's economic woes, renewed fears of a potential recession in the US tempers investors' appetite for riskier assets and might act as a headwind for the risk-sensitive Kiwi. This, along with the Reserve Bank of New Zealand's (RBNZ) surprise rate cut earlier this month and a dovish tilt, indicating more cuts over the coming months, might hold back traders from placing aggressive bullish bets around the NZD/USD pair. Nevertheless, spot prices remain on track to register strong gains for the fourth successive week.