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  • NZD/USD turned south after testing 0.7200 earlier in the day.
  • US Dollar Index gained traction during the European trading hours.
  • Investors await Manufacturing PMI data from the US.

After starting the new week with a bearish gap, the NZD/USD pair staged a decisive rebound and rose above 0.7200 in the early trading hours of the European session. However, with the greenback gathering strength ahead of the American session, the pair reversed its direction and was last seen losing 0.25% on a daily basis at 0.7172.

DXY pushes higher toward 91.00

The data from China on Monday revealed that the business activity in the manufacturing and the non-manufacturing sectors expanded at a softer pace than expected in January and made it difficult for the China-proxy kiwi to attract investors. 

Meanwhile, the US Dollar Index (DXY), which closed the previous week in the positive territory, is edging higher despite the upbeat mood and dragging NZD/USD. Supported by a selloff in the EUR/USD pair, the DXY is up 0.3% on the day at 90.84. Reflecting the risk-positive market environment amid renewed optimism for additional fiscal stimulus in the US, the S&P 500 Futures are up 1.1% on the day at 3,745.

Later in the session, the IHS Markit and the ISM will be both releasing the Manufacturing PMI data for January. There won’t be any significant macroeconomic data releases from New Zealand on Tuesday but the Reserve Bank of Australia (RBA) will announce its Interest Rate Decision and publish the Rate Statement. A sharp reaction the positively-correlated AUD/USD pair could impact NZD/USD’s movements during the Asian session.

Technical levels to watch for