NZD/USD trims gains, back below 0.7200 level

The NZD/USD pair extended its recovery from a two-week low touched on Monday and rose to 0.7227 (5-day high) but has now retraced back to currently trade back below 0.7200 handle.

The pair has been gaining traction on broader USD weakness on diminishing prospects of a Fed rate-hike action this year following Tuesday's disappointing productivity data.

Meanwhile, repositioning continues ahead of Thursday's RBNZ monetary policy decision, where the central bank is widely expected to go ahead and cut its benchmark interest rate by 25 bps point to 2.00%. 

Market participants will closely scrutinize the accompanying rate statement and subsequent press conference for hint over further easing in coming months. 

Technical outlook

Omkar Godbole, Editor and Analyst at FXStreet, notes, "Confluence of key technical levels is noted on the hourly chart in the range of 0.7187-0.7205. Given the hourly RSI is yet to hit the overbought territory, it is safe to assume that a break above 0.7205 could yield a move higher to 0.7256 (Aug 2 high)."

"On the lower side, rejection at 0.7187 (falling channel hurdle) followed by a break below 0.7148 would shift risk in favor of a drop to 0.7087 (Aug 7 low)."