NZD/USD consolidates below 0.71 amid thin trading volume

After starting the week with a small bearish gap and easing to its lowest level since early June at 0.7055 in the Asian session, the NZD/USD pair gained traction and erased its losses during the European trading hours. However, amid a lack of fresh catalysts, the pair went into a consolidation phase and was moving sideways near 0.7075 as of writing.

Earlier in the day, the weakening market sentiment due to increased geopolitical tensions between the U.S. and North Korea hurt the risk-sensitive kiwi and dragged the pair lower. However, the fact that the US Dollar Index struggled to carry last week's rally into the new week helped the pair retrace its losses. After closing the fourth week in a row higher, the DXY eased to mid-93s on Monday and is looking to close the day slightly lower. Nonetheless, today's drop looks like a technical correction and is unlikely to gather momentum.

With the American markets closed on Monday, the pair could continue to trade in its recent range. Early in the Asian session on Tuesday, electronic card retail sales from New Zealand will be released. Following a 0.2% contraction in August, markets expect the data to rebound to 0.7% in September. A higher-than-expected reading could allow the pair to continue to recover last week's substantial 150-pip loss.

Technical outlook

The first critical support for the pair aligns at 0.7000 (psychological level) ahead of 0.6920 (May 22 low) and 0.6890 (May 18 low). On the flip side, resistances could be encountered at 0.7085 (daily high), 0.7150 (200-DMA) and 0.7235 (50-DMA).

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