NZD/USD climbs to highest level in nearly two years above 0.6960

• NZD/USD is building on last weeks gains on Monday.
• Broad-based USD weakness helps the pair push higher.
• Risk flows likely to dominate markets during American session.

The NZD/USD pair closed the previous three weeks in the positive territory and preserved its bullish momentum at the start of the week. With the risk-on market environment weighing on the greenback, the pair climbed to its highest level since December 2018 at 0.6967. As of writing, NZD/USD was up 0.5% on the day at 0.6961.

DXY edges lower ahead of US PMI data

The US Dollar Index (DXY) lost 0.4% last week as the positive developments surrounding coronavirus vaccine candidates revived hopes for a steady recovery in the global economy in 2021. Reflecting the upbeat market mood, the S&P 500 Futures are gaining 0.5% and the USD is likely to struggle to stage a rebound if US stocks keep a strong footing after the opening bell. At the moment, the DXY is down 0.32% at 92.06.

Earlier in the day, the data published by Statistics New Zealand showed that Retail Sales in the third quarter rose by 28% on a quarterly basis. This reading followed the second quarter’s contraction of 14.8% and beat the market expectation of 20% to provide a boost to the kiwi.

Later in the session, the IHS Markit will publish the preliminary November Services and Manufacturing PMI data for the US. If these figures show an ongoing expansion in the private sector’s economic activity, the USD could continue to weaken against its major rivals.

There won’t be any significant macroeconomic data releases from New Zealand on Tuesday and the risk perception is likely to remain the primary driver of NZD/USD’s movements.

Technical levels to watch for