NZD/USD drops back to 10-month low near mid-0.6800s

The NZD/USD pair failed to build on early tepid recovery move and has now drifted into negative territory for the sixth consecutive session.

Currently trading around mid-0.6800s, the pair ran through some fresh offers and remained closer to 10-month lows touched last week. A mildly positive tone surrounding the US treasury bond yields helped the key US Dollar Index to build on Friday's rebound from 5-month lows and drove flows away from higher-yielding currencies - like the Kiwi.

The New-Zealand Dollar was also weighed down by NZ PM Bill English's comments, noting that NZD in 66-70 US Cent range is sustainable for exporters.  Meanwhile, the market seems to have largely ignored upbeat NZ treasury report that revealed reasonable pace of economic expansion in the first quarter of 2017 and that the underlying momentum will persist into the second quarter, while price pressures continues to build.

With the US congressional negotiators reaching a deal to fund government and avoid a shutdown, continuation of the pair's near-term downward trajectory remains a distinct possibility amid growing expectations of additional Fed rate-hike actions through 2017. 

Later during the day, the US Treasury Secretary Mnuchin’s speech and a batch of US economic data - Core PCE price index and ISM manufacturing report, would now be looked upon for some fresh impetus. 

Technical levels to watch

A follow through weakness below 0.6850 level is likely to get extended towards testing the 0.6800 handle ahead of 0.6775 horizontal support. On the flip side, any recovery attempts might continue to face fresh supply near the 0.6900 handle, above which a bout of short-covering might lift the pair beyond 0.6920 level, and mid-0.6900s, towards testing the key 0.70 psychological mark.