NZD/USD trims tepid recovery gains, US CPI and Yellen in focus

The NZD/USD pair snapped six days of losing streak and build on yesterday's rebound from the vicinity of very important 200-day SMA support.

The pair, however, failed to sustain its recovery move above 0.7100 handle and has now retraced over 25-pips from session peak level to currently trade around 0.7085-80 region. A broad based greenback retracement, as measured by the overall US Dollar Index, helped the pair to defend 200-day SMA and stage a tepid recovery bound on Thursday. 

However, increasing prospects of an eventual Fed rate-hike action, with CME group's FedWatch Tool pointing to 90% probability of such an action in December, continues to underpin the greenback and restricted further recovery for the major. 

Focus now shifts to US economic docket that includes the release of CPI, housing data (building permits and housing starts) and Philly Fed Manufacturing Index ahead of the Fed Chair Janet Yellen's testimony, which would be looked upon for fresh clues over the Fed's near-term monetary policy outlook and would eventually trigger the next leg of directional move for the major. 

Technical levels to watch

From current levels, 0.7070-65 area seems to protect immediate downside, which if broken is likely to drag the pair back towards the very important 200-day SMA support near 0.7020 region. On the upside, 0.7100 handle now seems to have emerged as immediate barrier above which the recovery momentum could get extended towards 0.7140 region.

To learn more about this topic, check our video analysis