NZD/USD corrects from monthly tops near 0.7250 ahead of US CPI, Powell

The corrective pullback in NZD/USD appears to gather pace in the European session, as the rates look to test the 0.7200 level.

The Kiwi extends its retreat from one-month highs of 0.7254, having failed to find acceptance above the latter on several occasions.

The latest leg down in the spot could be mainly attributed to a quick rebound seen in the US dollar across its main peers, as the broader market sentiment turns somewhat tepid.

The key catalyst behind NZD/USD’s weakness is the latest tiff between New Zealand and China over Beijing’s suspension of seafood imports. In response, the NZ authorities have asked for urgent clarification from their Chinese counterpart over the matter.

Further, the bounce in the US Treasury yields also seems to dull the attractiveness of the kiwi dollar as an alternative higher-yielding asset. Also, downbeat Chinese CPI figures for January failed to offer any respite to the NZD bulls.

Attention now turns towards the US CPI release and the Fed Chair Jerome Powell’s speech for fresh dollar trades. The Consumer Price index (CPI) is seen higher at 0.3% on the month and 1.5% YoY after December's 0.3% and 1.4% increase. Core CPI is expected to rise by 0.2% and 1.5% following 0.1% and 1.6% prior.

NZD/USD: Technical outlook

“An ascending trend line from January 11 guards the quote’s immediate upside around 0.7260. However, NZD/USD bears may wait for a clear downside break of a seven-week-old support line, at 0.7130 now, for fresh entries,” FXStreet’s Analyst Anil Panchal notes.

NZD/USD: Additional levels