- NZD/USD staged a modest bounce from weekly tops amid some USD profit-taking.
- The upbeat US economic outlook might continue to underpin the USD and cap gains.
- The US economic data, US President Biden’s spending plan eyed for a fresh impetus.
The NZD/USD pair rallied around 30 pips from weekly lows, albeit lacked any follow-through buying and remained capped below the key 0.7000 psychological mark.
The pair managed to find some support near the 0.6965-60 region and stalled the previous day’s sharp retracement slide from one-week tops amid a modest US dollar pullback. Following the recent strong rally to four-month tops, slightly overbought conditions prompted traders to take some profits off their USD bullish positions. This, in turn, was seen as a key factor that extended some support to the NZD/USD pair.
Apart from this, the uptick lacked any obvious fundamental catalyst and runs the risk of fizzling out rather quickly. The impressive pace of coronavirus vaccinations and US President Joe Biden’s spending plan have been fueling expectations for a relatively faster US economic recovery from the pandemic. This, along with the prevalent cautious mood, might continue to underpin the USD and cap gains for the NZD/USD pair.
Even from a technical perspective, the overnight downfall confirmed a fresh bearish breakdown through a flag pattern on hourly charts. This further makes it prudent to wait for some strong follow-through buying before confirming that the NZD/USD pair has bottomed out in the near-term and positioning for any further appreciating move.
Market participants now look forward to the US economic docket, featuring the releases of the ADP report on private-sector employment, Chicago PMI and Pending Home Sales data. The key focus, however, will remain on details about US President Joe Biden’s infrastructure spending plan of around $3 trillion to $4 trillion.
Technical levels to watch