NZD/USD slides to over 1-week low, bears eyeing a break below 0.6500 mark

The NZD/USD pair dropped to over one-week lows in the last hour, with bears now awaiting a sustained break below the key 0.6500 psychological mark.

The pair witnessed some follow-through selling for the second consecutive session on Tuesday and extended the previous day's rejection slide from the 0.6600 neighbourhood – the highest level since January 24. The prevalent risk-off mood was seen as one of the key factors that benefitted the safe-haven US dollar and drove flows away from perceived riskier currencies, including the kiwi.

The global risk sentiment took a turn for the worst amid renewed concerns about a further escalation in diplomatic tension between the world's two largest economies. The US State Department on Monday rejected China's territorial claims in the South China Sea. Beijing was quick to respond and claimed that the US was trying to inflame tensions in the disputed waters.

This comes amid growing worries over the ever-increasing coronavirus cases, which raised fears that renewed lockdown measures could derail the global economic recovery. It is worth reporting that California Governor Gavin Newsom decided to reimpose restrictions to tamp down a surge of coronavirus infections, which, in turn, further took its toll on the global risk sentiment.

Market participants now look forward to the US economic docket, highlighting the release of consumer inflation figures for June. The data, along with the broader market risk sentiment will play a key role in influencing the USD price dynamics and produce some short-term trading opportunities later during the early North American session.

Technical levels to watch