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NZD / USD clings to modest gains around 0.7150, lacks continuation

  • NZD / USD witnesses a modest short coverage rebound on Friday amid oversold conditions.
  • Upbeat US macro data on Thursday continues to prop up the USD and limit the pair’s gains.
  • The focus remains on the monthly US NFP jobs report.

The pair NZD / USD moves slightly higher during the European session on Friday, staying around the region of 0.7150, although it has had no continuation.

After an initial drop to the 0.7130 zone, the pair has managed to gain some positive traction and has recovered part of the previous day’s drop to a month’s lows. The rally has lacked an obvious catalyst and could only be attributed to some short coverage due to extreme oversold conditions on hourly charts. That said, any significant recovery seems elusive amid a modest strength in the US dollar.

USD has remained supported by upbeat US economic releases on Thursdaysuch as the ADP report, Unemployment Claims, and ISM Services PMI. Stronger data indicated that the US recovery is accelerating and it has fueled speculation that the Fed could advance the schedule to reduce its bond purchases. This has been evident by the sharp rise in US Treasury yields.

The focus of the market will therefore remain on Friday’s release of the US monthly employment data. The NFP report will be one of the most important economic data that will set the tone for the next FOMC meeting a The end of this month. A stronger NFP will put additional risk to the assumption that interest rates will stay low for a long time. This, in turn, should be enough to provide an additional boost to the USD and generate new selling around the NZD / USD pair.

Before the key event, investors can refrain from opening aggressive directional positions. This makes it prudent to wait for some solid continuation buying before confirming that the recent corrective drop is over.

NZD / USD technical levels

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