NZD/USD clings to strong recovery gains near 0.7050

The NZD/USD pair held on to its strong recovery gains and is building on to its move back above the very important 200-day SMA.

Currently flirting with session highs near mid-0.7000s, a brief pause in the post-election US Dollar rally has been the key factor contributing to the pair's recovery from sub-0.7000 mark, nearing Thursday's multi-month lows, touched during Asian session. Moreover, narrower-than-expected New-Zealand trade balance data, released during early Asian session, is further supportive of the pair's sharp recovery on Friday. 

Moreover, in absence of any major market-moving releases from the US, the current leg of up-move could also be attributed to short-covering ahead of a weekend and next week's key macro releases from the US - prelim GDP print on Tuesday and Friday's NFP data. 

Despite of today's sharp bounce back from near-term oversold conditions, further recovery gains are likely to be limited as expectations that President-elect Donald Trump’s aggressive fiscal spending policies will drive up inflation and force the Fed to raise interest rates faster-than-expected in 2017, which might continue to lift US Treasury yields and weigh on higher-yielding currencies - like the Kiwi.

Technical levels to watch

Sustained move above 0.7050 level might continue to confront resistance near 0.7080-85 region (weekly highs), which if cleared decisively has the potential to lift the pair beyond 0.7100 handle towards testing its next hurdle near 0.7115-20 region. On the downside, 0.7000 mark now becomes immediate support to defend below which the pair is likely to aim back towards 0.6950 support area before eventually dropping to test 0.6900 round figure mark.

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