NZD/USD: Testing support at 0.7160/70 as risk appetite fades

The New Zealand dollar is about to put an end to a six-day rally against its American counterpart, weighed by a weaker sentiment. The pair has retreated from four-month lows at 0.7215 and is looking for support above previous highs at 0.7160/70.

Risk aversion weighs on the kiwi

The NZD/USD is losing momentum on the back of sourer market sentiment on Thursday as the optimism triggered by the upbeat earnings reports released earlier this week, has faded. Wall Street is trading mixed following disappointing earnings data by the technological firm IBM which has revived concerns about supply chain disruptions.

Beyond that, ongoing concerns about Evergrande’s crisis in China extending into the country’s property sector are keeping demand for the risk-sensitive kiwi restrained. The threat of a deeper liquidity crisis continues gripping the sector; with news about more defaults popping up which is triggering declines on the bonds of most companies of the sector.

NZD/USD: Support art 0.7160/70 maintains the positive bias intact

From a technical perspective, the pair remains strong while above 0.7160/70 (September 3, 10 high). Below there, a further retreat below the 200-day SMA, at 0.7090 area would increase negative pressure and might send the pair to test the psychological level at 0.7000.

On the upside, immediate resistance remains at 0.7220 (Intra-day high) and then 0.7240 (Jun. 7 high), which would clear the path towards 0.7315 (May 23 high).

Technical levels to watch