The NZD/USD pair failed to build on last week’s strong up-move to over three-month highs beyond the 0.7200 handle and maintained its offered tone through early European session.
Against the backdrop of expectations for an eventual Fed rate-hike action this week, a modest pick-up in the US treasury bond yields, seems to have prompted traders to take some profits off the table, especially after the pair’s recent up-surge of over 350-pips over the last four weeks.
Moreover, traders also seemed inclined to lighten their positions, amid near-term overbought conditions and ahead of the very important FOMC decision on Wednesday. Apart from the much awaited Fed announcement, investors this week will also react to important macro releases – CPI and retail sales data from the US, and New-Zealand’s quarterly GDP report on Thursday.
Meanwhile, rising US bond yields have failed to extend any immediate support to the US Dollar and seems to be only factor limiting further downslide, at least for the time being, with the pair quickly rebounding few pips from session low touched in the past hour to currently trade around 0.7185-90 band.
Technical levels to watch
A follow through weakness below session lows support near 0.7170 level is likely to accelerate the slide towards 0.7145-40 intermediate support en-route the very important 200-day SMA support near the 0.7100 region. On the flip side, any up-move might continue to face some fresh supply near the 0.7200 handle, above which the pair seems all set to surpass multi-month highs resistance near 0.7220 level and head towards testing its next hurdle near mid-0.7200s.