NZD/USD tests 0.72 handle as DXY pushes higher toward 93

The NZD/USD pair remains offered on Tuesday as the greenback continues to gather strength against its peers. As of writing, the pair was trading at 0.7198, losing 1.04%, or 76 pips, on the day.

The pair started recording losses in the early trading hours of the Asian session today after the data from New Zealand revealed that the trade deficit grew more than expected on a yearly basis in August. Moreover, the Business Confidence Index released by the ANZ plummeted to 0 in September from 18.3 in August and the Activity Outlook Index dropped to 29.6% from 38.2%.

In addition to the kiwi's weakness, the bid tone surrounding the buck stays on the rise with the US Dollar Index refreshing its highest level since early September at 92.90. At the moment, the index is at 92.85, adding 0.45% on the day. Despite a lack of significant macroeconomic data from the U.S., the index was able to preserve its bullish momentum on heightened expectations of another rate hike in 2017. The CME Group FedWatch Tool shows that markets are pricing a 71.4% probability of a 25 bps hike in December.

Later in the session, the FOMC's Chairwoman Janet Yellen will be delivering a speech on the monetary policy and the uncertainty surrounding the soft inflation. In case Yellen affirms her suppor for further monetary policy tightening, we could see the pair suffer further losses.

• US: Focus on Yellen - TDS

Technical outlook

The RSI indicator on the daily graph continues to fall below the 50 handle, suggesting that the bearish momentum is gathering strength and the pair hadn't become technically oversold yet. 0.7130 (Aug. 31 low) is the first critical support ahead of 0.7060 (Jun. 1 low) and 0.7000 (psychological level). On the upside, resistances align at 0.7290 (50-DMA/100-DMA), 0.7345 (Sep. 22 high) and 0.7415 (Sep. 20 high).