NZD/USD rebounds above 0.7200 supported by risk flows

• NZD/USD turned north after edging lower in Asian session.
• US Dollar Index posts small daily gains above 90.40.
• Upbeat market mood is helping NZD find demand on Tuesday.

The poor performance of major equity indexes in Asia helped the greenback continue to gather strength against its rivals at the start of the day on Tuesday. After dropping to a daily low of 0.7167, however, the NZD/USD pair staged a rebound on the back of improving sentiment and was last seen gaining 0.1% on the day at 0.7202.

DXY continues to react to shifts in risk perception

Earlier in the day, the data from New Zealand showed that the Business NZ Performance of Services Index rose to 49.2 in December from 46.7 in November but this reading failed to help the kiwi find demand. 

Reflecting the risk-positive market environment during the European trading hours, Germany's DAX 30 and the Euro Stoxx 50 indexes both rise more than 1%. The US Dollar Index (DXY), which advanced to a fresh six-day high of 90.61, is currently clinging to small daily gains at 90.45.

Later in the session, the Conference Board's Consumer Confidence Index and the Housing Price Index data will be featured in the US economic docket. 

Meanwhile, Wall Street's main indexes look to start the day in the negative territory with the S&P 500 Futures losing 0.25%. Investors seem to have adopted a cautious stance amid renewed concerns over a delay to the passage of the $1.9 trillion US stimulus bill. If US stocks perform poorly on Tuesday, the greenback could gather strength and make it difficult for NZD/USD to push higher in the second half of the day. 

Technical levels to watch for