NZD/USD climbs to new eight-week highs, approaches 0.7100

• NZD/USD continues to push higher toward 0.7100 on Thursday.
• US Dollar Index is edging lower for third straight day.
• Investors await mid-tier data releases from the US.

The NZD/USD pair closed the second straight day in the positive territory on Wednesday and stayed relatively quiet around 0.7070 during the Asian trading hours on Thursday. With the greenback struggling to find demand, however, the pair extended its rally and touched its strongest level since early July at 0.7094. As of writing, NZD/USD was up 0.3% at 0.7090.

Earlier in the day, the data from New Zealand showed that the Terms of Trade Index improved to 3.3% in the second quarter from 0.1% in the first quarter. This reading came in better than the market expectation of 2.5% but failed to trigger a noticeable market reaction.

In the meantime, US stock index futures are up around 0.2% on the day, suggesting that the risk-positive market environment is likely to make it difficult for the greenback to stage a recovery in the second half of the day.

The US economic docket will feature the US Department of Labor's weekly Initial Jobless Claims. Moreover, July Goods Trade Balance and second-quarter Unit Labour Costs will be looked upon for fresh impetus.

NZD/USD outlook

Economists at Westpac think that the NZD/USD could target 0.7300.

"We remain bullish NZD/USD for the week ahead. A break above 0.7090 would signal a potential rise to the 0.7300 area," economists noted. "The primary driver of this two-week old rally is the USD. It has weakened recently, due to Fed Chair Powell’s caution, some data losing momentum, and hawkish ECB comments."

NZD/USD to advance nicely towards 0.73 on a break above 0.7090 – Westpac.

Technical levels to watch for