NZD/USD drops to 0.7125 area, back closer to multi-week lows set on Friday

The NZD/USD pair extended its steady intraday descent through the early European session and refreshed daily lows, around the 0.7130-25 region in the last hour.

The pair failed to capitalize on Friday's bounce from sub-0.7100 level, or six-week lows, instead met with some fresh supply on the first day of a new trading week. The intraday pullback from the vicinity of the 0.7200 mark was sponsored by resurgent US dollar demand.

The USD stood tall near three-month tops and remained well supported by the prospects for a relatively faster US economic recovery. The upbeat outlook was reinforced by Friday's stunning US monthly jobs report, which surpassed even the most optimistic estimates.

Apart from this, a fresh leg up in the US Treasury bond yields provided an additional lift to the greenback. The US Senate passed a much-awaited $1.9 trillion pandemic relief package and pushed the yield on the benchmark 10-year US bond back closer to 1.60%.

Another sell-off in the US fixed income market, along with reports of attacks on Saudi Arabian oil production facilities weighed on the risk sentiment. This was seen as another factor that benefitted the safe-haven USD and undermined the perceived riskier kiwi.

The NZD/USD pair has now drifted into the negative territory for the fourth consecutive session and seems vulnerable to slide further. Sustained weakness below the 0.7100 mark will reaffirm the bearish bias and set the stage for an extension of the ongoing corrective slide.

There isn't any major major market-moving economic data due for release from the US on Monday. Hence, US bond yields and the broader market risk sentiment will influence the USD price dynamics, which, in turn, should allow traders to grab some opportunities around the NZD/USD pair.

Technical levels to watch