NZD/USD recovers to turn back higher at 0.7140

A broad retracement in the US Dollar helped the NZD/USD pair to erase all of its daily losses and turn back into positive territory to currently trade around 0.7145-40 band.

With an initial rise to 0.7160 during Asian session, subsequent reversal to session low level at 0.7110 and recovery back to 0.7150, it is turning out to be a volatile session for the major as traders continue to reposition themselves ahead of RBNZ monetary policy decision on Thursday.

The central bank is widely expected to cut its benchmark rates by 25 bps. Market participants, however, remained divided over the possibilities of additional easing by the central bank in the near-future, which is fueling uncertainty surrounding the pair's near-term trajectory and forcing traders to trim their positions ahead of the key event risk.

Meanwhile, last week’s strong headline NFP print from the US has increased the prospects of an eventual Fed rate-hike decision later this year. This coupled with uncertainty surrounding RBNZ rate decision might restrict any further recovery.
 
Technical outlook

Omkar Godbole, Editor and Analyst at FXStreet, notes, "The bullish hammer formation (representing a sharp rebound from yesterday’s low of 0.7087 and a positive close at 0.7137) followed by a rise in Asia to 0.7150 suggests the spot is likely to test key resistance level of 0.7171 (rising trend line drawn from Jan 20 low – Mar 16 low & extended)."

"On the lower side, a failure at 0.7171 followed by a close below 0.7147 (June 9 high) could push the daily MACD below zero and trigger a fresh sell-off to 0.7050 levels ahead of the RBA rate decision."