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NZD/USD tests 0.69 handle as DXY recovers from session lows

  • US Dollar Index gains traction after finding support at 94.30.
  • Risk aversion weighs on commodity currencies on Monday.
  • Economic calendar lacks data that could impact the price action.

Despite a relatively subdued trading action, the NZD/USD pair is edging lower in the early NA session on Monday as the greenback starts to gather strength against its peers. At the moment, the index is at 0.6904, losing 0.5%, or 33 pips, on the day.

After starting the day with a bullish gap, the US Dollar Index rose to a fresh daily high at 94.55 but failed to extend its gains and turned flat at 94.30 before starting to move north again. At the moment, the index is at 94.40, up 0.1% on the day. A recovery seen in the US 10-year T-bond yield is supporting the index's upside in the session. 

On the other hand, a broad-based risk aversion on Monday is underpinning the demand for risk-sensitive currencies such as the kiwi. However, major equity indexes in the U.S. retraced its early losses to move up to the positive area in the last hour, keeping the pair's losses limited for the time being. With no more data left in the remainder of the session, the pair is likely to stay in its 40-pip daily range. A daily close below the 0.69 handle could trigger a short-term technical sell-off.

Technical levels to consider

According to the FXStreet's technical confluence indicator, the first hurdle aligns at 0.6975 (Fibo 38.2% retracement of monthly range) ahead of 0.7080 (50-DMA) and 0.7140 (200-DMA). On the downside, supports are located at 0.6870 (Nov. 6 low), 0.6820 (Oct. 31 low) and 0.6775 (Jun.2 2016 low). 

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