NZD/USD breaks below 0.73 handle, tumbles to near 4-week lows

The NZD/USD pair faded early Asian session spike to 0.7372 level and tumbled over 100-pips in the post-RBNZ trading action.

The pair came under intense selling pressure after the RBNZ Governor Graeme Wheeler intensified the warning over the recent NZD strength and showed readiness to intervene in FX market. 

Earlier the RBNZ held its official cash rate at a record low 1.75%, as was widely expected, and reiterated that the monetary policy would remain accommodative for some time. The central bank, however, lowered the short term inflation outlook but said that it expects a neutral view to persist with inflation projections well anchored around 2%.

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Adding to this, a pickup in the US Dollar demand, backed by a modest uptick in the US Treasury bond yields, further aggravated the selling pressure around higher-yielding currencies and dragged the pair to near 4-week lows, around the 0.7260 region.

Meanwhile, possibilities of some stops being triggered on a decisive break below 50-day SMA support near the 0.7300 handle might have also collaborated to the pair's sharp slide over the past hour or so.

Later during the NA session, the US economic data - PPI print and weekly jobless claims data would now be looked upon for some fresh trading impetus, while Friday's CPI print would play a key role in determining the pair's next leg of directional move.

Technical levels to watch

From current levels, immediate support is pegged near 0.7220 level, below which the pair is likely to break below the 0.7200 handle and aim towards testing 100-day SMA support near the 0.7140 region. On the flip side, any recovery move might now confront some fresh supply near the 0.7300 mark (50-day SMA), which if cleared might trigger a short-covering bounce back towards the 0.7360-70 resistance area.