NZD/USD loses traction before reaching 0.7100, turns negative on the day

• NZD/USD trades in the negative territory following last week's rebound.
• US Dollar Index stays relatively quiet below 92.00.
• Markets are likely to remain subdued in the remainder of the day.

After rising more than 100 pips and snapping a three-week losing streak last week, the NZD/USD pair edged higher toward 0.7100 during the Asian trading hours on Monday but struggled to preserve its bullish momentum. As of writing, the pair was down 0.2% on a daily basis at 0.7058.

In the absence of significant fundamental drivers and high-tier macroeconomic data releases at the start of the week, the US Dollar Index (DXY) extends its sideways grind. For the fifth trading day on Monday, the DXY is fluctuating in a narrow band a little below 92.00.

Later in the session, the Federal Reserve Bank of Dallas' Manufacturing Business Index for June will be featured in the US economic docket, which is likely to be ignored by market participants. Additionally, NY Fed President John Williams and the Fed's Vice Chairman for Supervision, Randal Quarles, will be delivering speeches.

NZD/USD medium-term outlook

In a recently published report, Well Fargo analysts argued that the NZD/USD pair is likely to push higher over the medium term.

"Given supportive growth and monetary policy fundamentals the medium-term outlook for the New Zealand currency is favorable, even with somewhat unsettled markets given hawkish Federal Reserve hints," analysts said. “While we now expect an initial RBNZ rate hike in Q2-2022, it is possible a rate increase could come even earlier than that, which would also be supportive of the NZ currency. In this strong growth/rising interest rate scenario, the NZ dollar could gain close to $0.8000 over the medium term.”

Technical levels to watch for