NZD/USD erases tepid recovery gains, turns negative at 0.7120

The NZD/USD pair erased its early Asian session recovery gains to 0.7160 region and turned lower to currently trade near session low at 0.7120 level.

On Monday, the pair dipped below 0.7100 handle but managed to bounce-off two-week low level as market participants seemed to reposition themselves ahead of Thursday's RBNZ monetary policy decision. The central bank is widely expected to lower its benchmark interest rates by 25bps points, which to some extend might already be priced-in by the market. 

Markets, however, remain undivided over the prospects of further easing by the central bank in the near-future, fueling uncertainty and are restricting any meaningful recovery for the pair. 

Meanwhile, the greenback continues to benefit from last week's impressive headline NFP print, which has now increased prospects of an eventual Fed rate-hike by the end of this year and is further hindering the pair's recovery momentum. 

In absence of any major economic releases, RBNZ rate decision remains immediate fundamental trigger that would determine the pair's near-term trajectory.

Technical levels to watch

From current levels, weakness below 0.7100 round figure mark, and a subsequent break below 0.7087 (Monday's swing low), now seems to exert additional selling pressure that should drag the pair towards its next major support near 0.7000 psychological mark. A convincing break below 0.7000 mark support would confirm a bearish head & shoulders chart pattern formation on daily chart and increase the pair's vulnerability to continue drifting lower in the near-term.

On the flip side, 0.7140-50 now seems to act as immediate barrier, above which the recovery momentum is likely to get extended towards 0.7200 round figure mark before aiming towards retesting recent closing highs resistance near 0.7240-45 region.