NZD/USD rebounds sharply from 5-month lows, 0.70 mark back on sight

The NZD/USD pair reversed an early dip to 0.6930 area and has now recovered around 60-pips from fresh 5-month lows touched earlier today.

NZ First leader Peters announced last week that his party would form a coalition with Labour and the market greeted the new government by sending the domestic currency sharply lower across the board. 

Adding to this, persistent US Dollar buying interest, supported by reviving tax-reform hopes, further contributed to the pair's fall at the start of a new trading week. 

Meanwhile, a subdued action around the US Treasury bond yields, and a modest greenback retracement, extended some support to higher-yielding currencies and helped the pair to rebound sharply from its lowest level since May 22. 

It, however, remains to be seen if the up-move is backed by any genuine buying or is solely led by short-covering, amid near-term oversold conditions. In absence of any relevant macroeconomic releases, the US bond yield dynamics would continue to act as an exclusive driver of the pair's movement on Monday.

Technical levels to watch

Recovery momentum beyond the key 0.70 psychological mark could get extended towards 0.7025 horizontal resistance, above which a fresh bout of short-covering could lift the pair back towards 0.7060 hurdle.

On the flip side, 0.6950 level now becomes immediate support to defend, which if broken would turn the pair vulnerable to aim towards testing the 0.6900 handle with some intermediate support near the 0.6930 region.