The NZD/USD pair extended its corrective pullback from one-month tops and dropped to fresh daily lows, around mid-0.7000s during the early part of the European session.

The pair gained some positive traction on the first day of a new trading week and shot to the highest level since September 16 in reaction to a hotter-than-expected New Zealand CPI report. Bulls, however, struggled to capitalize on the move, or find acceptance above the 0.7100 mark amid a strong pickup in the US dollar demand.

The prospects for an early policy tightening by the Fed pushed the yield on the benchmark 10-year US government bond back above the 1.60% threshold on Monday. This, along with a generally softer risk tone, benefitted the greenback's relative safe-haven status and acted as a headwind for the perceived riskier kiwi.

BULLISH AND BEARISH CONDITIONS/ POSSIBILITIES :

Meanwhile, technical indicators on the daily chart are holding comfortably in the bullish territory and support prospects for an extension of last week's strong move up. That said, slightly overbought RSI on hourly charts seemed to be the only factor that prompted some profit-taking.

Nevertheless, the near-term bias remains tilted in favour of bullish traders. Hence, any meaningful pullback might be seen as a buying opportunity. This should help limit the downside near 100-day SMA, around the 0.7020-15 area, which is followed by 50-day SMA near the 0.7000 psychological mark.

That said, bulls are likely to wait for a sustained strength beyond the 0.7100 confluence hurdle before placing aggressive bets. The NZD/USD pair might then climb to September monthly swing highs, around the 0.7155-60 region, before aiming to reclaim the 0.7200 round-figure mark.

NZDUSD

Oct 18 2021