NZD/USD turns lower, back below 0.73 mark ahead of US GDP

The NZD/USD pair faded early bullish spike back closer to multi-month tops and has now drifted into negative territory, eroding part of previous session's strong up-move.

The pair failed to build on early up-move led by today's upbeat release of NZ business confidence index, coming in at 24.8 for June as compared to May's 14.9, despite persistent greenback selling interest. With the key US Dollar Index hovering at multi-month lows, the pair's retracement from higher levels could be solely attributed to surging US Treasury bond yields. 

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Against the backdrop of the latest remarks by the Fed Chair Janet Yellen, reiterating prospects for gradual rate tightening cycle, continuous up-move in the US bond yields seems to be the only factor driving flows away from higher-yielding currencies - like the Kiwi.

Traders seem to have largely ignored positive trading sentiment around commodity space, which to some extent seems to have been negated by a mildly softer tone surrounding European equity markets, with the yields dynamics acting as an exclusive driver of the pair’s retracement to session lows near 0.7285-80 region. 

Next in focus would be the US economic docket, featuring the release of final Q1 GDP print and the usual weekly jobless claims. A stronger than expected growth number would increase possibilities of additional Fed rate hike move by the end of this year and further lift bond yields, making the greenback more attractive against its higher-yielding counterpart. 

Technical levels to watch

Immediate support is pegged near 0.7270-65 region, below which the pair is likely to accelerate the slide towards 0.7245 horizontal support en-route 0.7215-10 area.

On the upside, any momentum back above the 0.7300 handle might continue to confront some fresh supply near 0.7330-40 region, which if cleared has the potential to lift the pair towards yearly highs resistance near 0.7375-80 zone.