NZD/USD clings to gains back above 0.7100 handle

After an initial drop below 0.7100 handle, the NZD/USD pair recovered the lost ground and is now extending its recovery momentum to currently trade at a fresh session high around 0.7110-15 region.

The US Dollar price dynamics remains the sole driver of the pair's near-term trajectory and a broad based greenback retracement helped the pair to regain control over 0.7100 handle, erasing Friday's minor losses. The current bullish momentum, however, runs the risk of a sudden reversal amid diverging monetary policy expectations from RBNZ and the Federal Reserve. The New-Zealand central bank (RBNZ) is expected to cut rates at its November meeting, while the Fed is seen moving towards raising interest rates by the end of this year. 

Later during the day, US manufacturing data that includes - Empire State Manufacturing Index, Industrial Production and Capacity Utilization Rate, would be looked upon for short-term trading opportunities. On Tuesday, quarterly CPI print from New-Zealand during early Asian session and GDT Price Index will be in focus and help investors to determine the next leg of directional move for the pair.

Technical levels to watch

From current levels 0.7133 (Friday's swing high) seems to act as immediate resistance above which the pair seems to head back towards 100-day SMA important support break, now turned strong resistance near 0.7165-70 region.

On the downside, sustained weakness below 0.7100 handle, leading to a break below 0.7075 support (session low region), is likely to drag the pair immediately towards 0.7050 region below which the pair might turn vulnerable to break below 0.7000 psychological mark and aim towards testing the very important 200-day SMA support near 0.6950 region.