The NZD/USD pair reversed all of its early gains to 0.6930 region and retreated sharply back below the 0.6900 handle during early European session.
Currently trading around 0.6890-85 band, the latest leg of downslide could be attributed to a modest greenback recovery, with the key US Dollar Index bouncing off multi-month lows and moving back closer to the 98.00 handle. Also collaborating to the pair’s sharp fall in the past hour or so was a fresh wave of weakness in the commodity space, which tends to dent demand for commodity-linked currencies, including the New-Zealand Dollar.
The pair, however, seems to be finding some supported from Tuesday’s upbeat GDT Price Index, showing a rise in daily products for the fifth consecutive auction. Moreover, the ongoing slump in the US treasury bond yields, amid ongoing political worries in the US, was further seen contributing towards limiting further downslide for higher-yielding currencies – like the Kiwi.
It, however, remains to be seen if the pair is able to gain some fresh traction or repeated failed attempts to sustain its up-move beyond the 0.6900 handle points to additional depreciating move in the near-term amid absent fundamental drivers, in-terms of any major market moving economic releases.
Technical levels to watch
A follow through retracement below 0.6870-65 horizontal support could drag the pair back towards 0.6845-40 support area, below which a fresh leg of weakness would turn the pair vulnerable to break below the 0.6800 handle ahead of its next major support near 0.6775 level.
On the flip side, sustained move beyond the 0.6900 handle, leading to a subsequent break through 0.6920-30 hurdle (multi-day tops), should continue to lift the pair further towards testing 50-day SMA important hurdle near 0.6960 region.