The NZD/USD pair erased majority of its early losses to 6-day low below 0.7100 handle and is currently trading with only marginal losses around 0.7125-30 region.
Despite of a disappointing reading of the second growth figures, the incoming US economic data have been pointing to tepid but gradual economic recovery. The latest of these positive news flows came in the form of spectacular headline NFP print, released on Friday, which revived hopes of an eventual Fed rate-hike decision later this year.
Meanwhile, the New-Zealand Dollar continues to be weighed down by expectations of a 25bps rate-cut by RBNZ, later during the week. Although the decision already seems to be priced-in, but market participants await to see the tone adopted in the accompanying rate statement and subsequent press conference. Dovish outlook would open room for further easing by the central bank and hence, would restrict any swift recovery for the NZD/USD major.
Technical outlook
Omkar Godbole, Editor and Analyst at FXStreet, notes, "Pair’s break above 0.7205 (38.2% of 0.8836-0.6197) last Tuesday followed by a sharp reversal on Wednesday and a drop below 0.7140 on Friday suggest the pair could complete head and shoulder formation on the daily chart."
"A break below 0.7079 (July 6) on daily closing basis would add further credence to the bearish view and open doors for a test of neckline support around 0.6935 levels."
"On the higher side, only a day end close above 0.7205 would suggest bearish invalidation."
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