NZD/USD retraces daily gains, approaches 0.70

The NZD/USD pair touched its monthly high at 0.7045 during the European session but started to retrace its gains later in the NA session as the greenback started to build up a bullish momentum. As of writing, the pair was trading at 0.7006, still up 11 pips, or 0.16%, on the day.

The price action of the pair seems to be driven by the US Dollar Index on Tuesday. After spending the majority of the day consolidating below the 97 handle, the index rose sharply as the rising U.S. T-bond yields increased the demand for the greenback. The index increased to 97.32, erasing all of its losses from Monday, and is now at 97.29, up 0.42% on the day.

• U.S. Treasury bond yields edge higher on Tuesday
• CME Group FedWatch's June hike probability leaped above 80%

Although the macro data from the U.S. came in generally positive, the markets' reaction was limited. Following the announcement of 2018 fiscal year budget, however, the major equity indexes in the U.S. continued to build on their recent gains, suggesting an improving risk sentiment on Tuesday. On the other hand, the recent strength seen in the commodities faded a little on Tuesday, allowing the commodity-linked kiwi to consolidate its gains.

• US: Business activity growth rebounds in May, led by service sector - Markit

At the early trading hours of the Asian session, the trade balance figures will be released from New Zealand, which could be the next catalyst for the pair. 

Technical outlook

The immediate support for the pair could be seen at 0.70 (psychological level) ahead of 0.6950 (50-DMA) and 0.6915 (10-DMA). On the upside, resistances align at 0.7040 (100-DMA), 0.7080 (200-DMA) and 0.7100 (psychological level).