- NZD/USD bulls seeking a break of the overnight for a test of daily resistance.
- Bears relying on counter-trendline resistance and continued USD strength.
- The focus will be on the US CPI data event on Wednesday as USD attempts to print higher highs.
NZD/USD is trading at 0.7005 and 0.2% higher on the day following a rally from the lows of 0.6968 to a high of 0.7010.
The US dollar remained better bid overall, but the commodity complex bounced back to life as the US infrastructure bill cleared the Senate.
It is a bipartisan package that could provide the nation's biggest investment in decades in roads, bridges, airports and waterways.
Consequently, the proxy currencies, such as the antipodeans and the loonie were offsetting early losses.
With a light calendar in APAC markets, the focus will be on Wednesday's US Consumer Price Index data.
''The last few days have seen a turn in market sentiment towards being more positive about the US economic outlook, even with the rise in COVID infections. A strong CPI print may push USD rates and DXY even higher as speculation on the Fed tapering QE rises,'' analysts at ANZ Bank argued.
On the other hand, an inline or even an unexpected disappointment in the data could equate to some profits in the US dollar markets being taken out.
''Another strong print is unlikely to sway core FOMC voters that the current phase of intense inflation pressures is anything other than transitory,'' analysts at ANZ Bank also pointed out, adding:
''Following the July FOMC meeting Chair Powell said the Fed wouldn’t hesitate to use its policy tools if inflation pressures prove to be more than just transitory. However, he thinks this is unlikely to happen until maximum employment is reached, and this goal remains some way off.''
The commodity complex and the kiwi could be cut some temporary slack if the US dollar wobbles.
NZD/USD technical analysis
From a daily perspective, the bird is bottoming and bulls are in anticipation of a break of 4-hour resistance structure for an opportunity to target a restest of daily resistance:
Daily chart
4-hour chart
From a bullish 4-hour perspective, the price will need to break 4-hour resistance, as illustrated above.
On a retest of the support stricture, the price would potentially hold and rally deeper into resistance territory.
On the other hand, should the dollar continue to rise, then the kiwi would fairly at the counter-trendline resistance and be forced back into the base of the daily support, potentially as follows:
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