NZD/USD surges to 4-month highs, now eyeing 0.72 handle

After yesterday's brief pause, the NZD/USD pair regained traction and has now jumped to fresh 4-month tops near 0.7165-70 region.

With markets fully pricing-in Fed rate-hike action in June, the incoming US economic data, including Monday's factory orders data and ISM nonmanufacturing PMI, continues to dampen possibilities of a faster Fed rate-tightening cycle. 

Hence, a sharp retracement in the US treasury bond yields did little to extend any support to the US Dollar and was seen benefitting higher-yielding currencies - like the Kiwi. Spot built on Friday's strong momentum led by disappointing headline NFP print and has now moved within striking distance of reclaiming the 0.7200 handle. 

Meanwhile, possibilities of some stops being triggered on a sustained break through 0.7150 resistance area might have also collaborated to the pair's sharp bullish spike in the past hour of so. 

In absence of any major market moving economic releases from the US, market participants would focus on the outcome of latest dairy auction - GDT price index, for some fresh bullish impetus.

Technical levels to watch

From current levels, 0.7190-0.7200 region is likely to act as immediate hurdle, above which a fresh bout of short-covering could lift the pair towards 0.7235-40 horizontal zone en-route 0.7275-80 resistance.

On the downside, 0.7150 level now becomes immediate support to defend, which if broken is likely to drag the pair back towards the very important 200-day SMA support near the 0.7100 handle.