Thursday has brought with it a notable reverse in sentiment, and equities dropped sharply, which dragged down commodity-linked currencies, such as the AUD or NZD.
During the US session, the NZDUSD pair was trading 1% weaker, last seen at around 0.67.
There seems to be no catalyst behind the steep sell-off, but we must admit that the recent rally has been extremely overbought, and the daily chart has been vertical for many stocks. Thus, a correction is healthy.
From other news, traders paid attention to some US macro data. Initial jobless claims dropped to 881,000 from 1,011K previously, and continuing claims also improved to 13.25 million from 14.49 million last week.
Moreover, the ISM services index for August failed to meet expectations and ticked lower to 56.9, down from 58.1 previously.
The 0.67 barrier appears to be strong support as previous highs are located here, thus bulls are expected to buy this dip. However, if the kiwi declines below this level, a larger correction could occur, targeting 0.6650 and 0.66.
On the other hand, the resistance could be located at 0.6740 and afterward at the current cycle highs of 0.6790.
Trading FX/CFDs on margin bears a high level of risk, and may not be suitable for all investors. Before deciding to trade FX/CFDs you should carefully consider your investment objectives, level of experience, and risk appetite. You can sustain significant loss.