NZD/USD clings to gains near session tops, comfortably above 0.7200 mark

• NZD/USD caught some fresh bids on Tuesday amid renewed USD selling bias.
• The underlying bullish tone continued undermining the safe-haven greenback.
• COVID-19 jitters could temper enthusiasm and cap the upside for the major.

The NZD/USD pair edged higher through the Asian session and moved back above the 0.7200 mark. The pair was last seen trading near daily tops, around the 0.7215-20 region.

The pair managed to regain positive traction on Tuesday and for now, seems to have snapped two consecutive days of a negative move. The uptick was sponsored by the emergence of some fresh selling around the US dollar and pushed the NZD/USD pair well within the striking distance of multi-year tops.

The greenback struggled to capitalize on the previous day’s goodish bounce from two-and-half-year lows amid uncertainty about a US runoff election in Georgia. The outcome of two Senate seats will have a big impact on the incoming US President Joe Biden’s ability to pursue his preferred economic policies.

Apart from this, hopes for a strong global economic recovery in 2021 and the likelihood of additional US fiscal aid package remained supportive of the underlying bullish tone in the financial markets. This was seen as another factor that continued undermining the greenback’s safe-haven demand.

That said, growing market worries about the continuous surge in new COVID-19 cases, which resulted in the imposition of fresh lockdown measures in the UK, tempered enthusiasm. This, in turn, might extend some support to the buck and keep a lid on any runaway rally for the NZD/USD pair.

This makes it prudent to wait for some strong follow-through buying beyond the 0.7230-40 region before positioning for any further appreciating move. The subsequent momentum could then assist the NZD/USD pair to aim back to reclaim the 0.7300 round-figure mark for the first time since April 2018.

Market participants now look forward to the US economic docket, highlighting the release of ISM Manufacturing PMI. Apart from this, developments surrounding the coronavirus saga might influence the USD price dynamics and produce some short-term trading opportunities around the NZD/USD pair.

Technical levels to watch