NZD/USD fails to extend Friday’s recovery move from over 2-month lows

After an initial uptick, the NZD/USD pair drifted into negative territory and eroded part of Friday's recovery gains from over two-month lows.

With investors looking past Friday's speech by the Fed Chair Janet Yellen, which failed to offer any fresh clues over the central bank's monetary policy path, the pair lacked any strong follow through momentum amid a minor greenback recovery. In fact, the key US Dollar Index has managed to bounce off YTD lows and kept a lid on the pair's recovery move from the lowest level since mid-June, touched last week.

Adding to this, the prevalent risk-off environment, coupled with a modest pickup in the US Treasury bond yields further weighed on riskier/higher-yielding currencies - like the Kiwi.

Meanwhile, reemergence of fresh selling on every attempted recovery move clearly seems to suggest that the pair's near-term bearish trajectory might be still far from over. Hence, a follow through weakness, below the 0.7200 handle, remains a distinct possibility amid absent fundamental drivers, in terms of any major market moving economic releases.

Technical levels to watch

Immediate support is pegged near 0.7225 level, below which the pair is likely to retest the 0.7220-0.7190 support area. A follow through weakness has the potential to continue dragging the pair towards 100-day SMA, near 0.7170 level, en-route the very important 200-day SMA support around the 0.7130-25 region.

On the upside, sustained recovery above 0.7255-60 immediate hurdle might trigger a short-covering bounce towards the 0.7300 handle before the pair eventually makes a fresh attempt to retest a strong supply zone near 50-day SMA, around the 0.7330-35 region.