The greenback continued gaining traction through mid-European session, dragging the NZD/USD pair back below the 0.7300 handle.
The pair has now reversed all of its gains recorded on Friday and now seems to have reaffirmed strong supply just ahead of mid-0.7300s, nearly 5-month highs failed three times in the last five trading sessions. The pair is reacting to higher US Treasury bond yields, which now seems to be lending some support to the US Dollar‘s recovery move from nine-month lows and driving flows away from higher-yielding currencies – like the Kiwi.
Against the backdrop of RBNZ’s clear signal to hold rates until September 2019, investors now seem to have realised that the greenback selling might have been overdone, especially against the New-Zealand Dollar. Hence, the pair seems vulnerable for a near-term corrective slide amid a follow through long unwinding pressure, following its recent upsurge of over 500-pips since mid-May.
Moving ahead, today’s release of US ISM manufacturing PMI would now be looked upon for some fresh trading impetus ahead of NZIER Business Confidence Index, due during early Asian session on Tuesday.
Technical levels to watch
Immediate support is pegged near 0.7275-70 zone, below which the corrective slide could get extended towards mid-0.7200s before the pair eventually drops to its next major support near 0.7210 region.
On the upside, momentum back above the 0.7300 handle now seems to confront fresh supply near 0.7330 area, which if cleared has the potential to lift the pair beyond 0.7345 level towards testing yearly tops resistance near 0.7375 level.