NZD/USD drops back below 0.7150 as US dollar attempts a bounce

NZD/USD is pulling back towards the 0.7140 mark after taking out resistance at 0.7150 with relative ease on Friday. The US dollar index (DXY) is inching higher towards 92.20, as risk-om market sentiment eases, at the time of writing.

The Asian markets remain mixed with Australia’s ASX 200 down 0.75%, while China’s Shanghai Composite Index is trading higher by 0.78% along with Japan’s Nikkei 225 up around 1.50%. Meanwhile, the S&P 500 futures are down 0.10% and the US 10-year yields are up 1.326%, helping the US dollar index gain.

The US dollar index slipped to 91.94 on Friday, after the Nonfarm Payrolls came in at 235,000, far lower than the expected 750,000. A drop in unemployment (5.2% versus 5.4%) and an uptick in July revised job data to 1.053 million, failed to check the greenback’s slide.

Markets are expecting the Fed to maintain its dovish tone and further push its tapering timeline to December 2021 or early 2022. Having said that, an uptick in the revised August data could invite an early announcement.

The worsening COVID-19 situation in the US, with prolonged restrictions, weighed on the job data. The Fed is expected to wait for further growth in the job market along with sustained inflation targets above 2% to withdraw its asset purchase program and consider a rate hike.

Technical levels

NZD/USD bulls had taken out 0.7150 resistance, its June 15 high, with relative ease on Friday. The currency could pull back to 0.7100 initial support in the near term. A break lower would push further to its 0.7030 support, the September 1 low.