The NZD/USD pair built on to bearish weekly gap and dropped below 0.7100 handle, reversing all of its tepid recovery gains recorded in the previous two sessions.
Currently trading around 0.7075-80 region, testing session lows, the pair remained well offered through the course of Asian and European trading sessions after New-Zealand Prime Minister John Key announced that he will resign and will not stand for re-election in 2017. The pair failed to benefit from upbeat Chinese services PMI data released on Monday and buoyant sentiment around commodity markets. The pair even ignored the upbeat release of ANZ Commodity Price Index, which rose 2.7% in November, and NZ treasury’s upbeat assessment of the economy.
Moreover, with the initial jitters over the Italian referendum subsiding renewed risk-on mood, which tends to boost demand for riskier assets / higher-yielding currencies - like the Kiwi, has failed to provide any respite for the major.
Later during NA session, the release of US ISM non-manufacturing PMI will now be looked upon for short-term impetus and trading opportunities.
Technical levels to watch
Weakness below session low support near 0.7070 is likely to get extended towards the very important 200-day SMA support near 0.7050 region below which the pair is likely to turn vulnerable to head back towards testing 0.70 psychological mark support. On the upside, any recovery attempts back above 0.7100 handle might now confront resistance near 0.7125 region, which if cleared has the potential to lift the pair back towards 0.7170 (Nov. 30 high) en-route 100-day SMA resistance near 0.7190-95 region.
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