The NZD/USD pair faced rejection at 0.7300 handle, reversing its entire OPEC deal-led bullish spike and has now dropped to a fresh session low near 0.7265-60 region.
A broad based greenback recovery, as measured by the overall US Dollar Index, could be the primary reason attributed to the pair's reversal. Moreover, markets seem to have digested the news major oil producers agreeing on a deal to cap oil output and is depicted by retracement in crude oil prices, which eventually is weighing on higher-yielding currencies - like Kiwi.
Meanwhile, market seems convinced that RBNZ would further ease its monetary policy at November meeting, eventually forcing traders to use the bounce back as an opportunity to unwind bullish bets or initiate fresh short positions.
Next on tap would be US economic releases that include - the final US GDP print for Q2 2016, accompanied with weekly jobless claims data and followed by pending home sales data, later during NA trading session.
Technical outlook
Fawad Razaqzada, Technical Analyst at FOREX.com, notes, "Some of the key potential support levels, or bearish targets, to watch include the area between 0.7200 and 0.7225 which had been support in the past. Below here, the Fibonacci retracements could be additional targets to watch; in particular the 61.8% retracement level around 0.6980/5, because below that lies another key prior low in close proximity at 0.6955 and above it the psychological level of 0.7000 which is also a key support on the weekly time frame."
"Our short-term technical bearish bias on this pair would become invalid upon a potential break above the resistance trend of the bearish channel. In that case, actually, the bearish channel would then turn into a bullish flag breakout scenario, which is anything but bearish. So, the key level to watch on the upside is around 0.7325 as a break above it would also re-establish the broken bullish trend line. For now though, the bears appear to be in the driving seat."
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