NZD/USD pulls away from multi-week highs, looks to close near 0.6170

• NZD/USD fails to hold above 0.6200 on Wednesday.
• Heightened US-China tensions force China-proxy NZD to weaken.
• ANZ Business Confidence Index will be released at 0100 GMT on Thursday.

The NZD/USD pair rose to its highest level in 11 weeks at 0.6233 on Wednesday but lost its traction in the second half of the day. As of writing, the pair was trading at 0.6170, losing 0.4% on a daily basis.

USD capitalizes on risk-off flows

The broad-based selling pressure surrounding the greenback helped the pair post strong gains on Tuesday and allowed it to stretch higher. The US Dollar Index (DXY) fell to its worst level in more than three weeks at 98.72 during the European trading hours.

However, heightened tensions between the US and China over Hong Kong weighed on market sentiment and caused the China-proxy kiwi to weaken against its rivals.

US Secretary of State Mike Pompeo on Wednesday announced the US was no longer autonomous from China. "No reasonable person can assert today that Hong Kong maintains a high degree of autonomy from China, given facts on the ground," Pompeo said in a statement. 

Boosted by the souring market mood, the DXY staged a rebound and caused the bearish pressure to remain intact. At the moment, the index remains on track to close the day modestly higher around 99.10.

In the early trading hours of the Asian session on Thursday, the ANZ will release its Business Confidence Index and Activity Outlook Index for New Zealand.

Technical levels to watch for

NZD/USD