NZD/USD refreshes session lows, bears challenge 0.7000 mark

The NZD/USD pair dropped to fresh daily lows during the early North American session, with bears now awaiting a sustained break below the key 0.7000 psychological mark.

The pair struggled to capitalize on the previous day's post-US CPI positive move, instead met with some fresh supply on Thursday and snapped two consecutive days of the winning streak. Concerns about the potential economic fallout from the fast-spreading Delta variant of the coronavirus was seen as a key factor that acted as a headwind for the perceived riskier kiwi. This, along with a modest US dollar uptick, exerted some additional pressure on the NZD/USD pair.

The greenback was back in demand and stalled the overnight profit-taking slide amid the possibility for an earlier than anticipated tapering by the Fed. The market bets were reinforced following the release of the latest US Producer Price Index for July, which rose sharply for the sixth month in a row and offered little evidence of moderating inflationary pressures. This, in turn, triggered a goodish rebound in the US Treasury bond yields and underpinned the greenback.

Other economic data released from the US showed that the number of Americans claiming unemployment-related benefits fell to 375K during the week ending August 7 from the previous week's upwardly revised reading of 387K (385K reported earlier). Against the backdrop of Friday's blockbuster NFP report, the data marked another step towards the Fed's goal of substantial further progress in the labour market recovery. This extended additional support to the buck.

With the latest leg down, the NZD/USD pair has now reversed the overnight gains and some follow-through selling below the 0.7000 mark will expose weekly lows, around the 0.6970-65 region. This should now act as a key pivotal point for short-term traders. A sustained break below will set the stage for a further near-term depreciating move towards the lower boundary of a near two-month-old trading range support, around the 0.6925-20 region.

Technical levels to watch