NZD/USD hangs near 3-week lows, seems vulnerable to slide further

The NZD/USD pair struggled for a firm direction and was seen consolidating overnight slump to three-week lows.

Political uncertainty drove the New Zealand Dollar lower for the second straight session on Tuesday. In addition to the NZ election setback, traders also reacted to a bigger-than-expected NZ goods trade deficit for August. 

The selling pressure aggravated during NY trading session after the Fed Chair Janet Yellen's comments provided an additional boost to the already stronger US Dollar. Yellen reinforced market expectations for another rate hike move in 2017, which eventually drove investors away from higher-yielding currencies - like the Kiwi.

   •  Fed holds the line, despite more hawkish BoC & BoE - Westpac

The pair now seems to have entered a consolidation phase as investors now seemed reluctant to place aggressive bets ahead of the RBNZ monetary policy decision. 

   •  RBNZ to keep the OCR on hold at 1.75% – Westpac

Against the backdrop of persistent USD buying interest, backed by a follow through uptick in the US Treasury bond yields remains supportive of some additional downward pressure for the major.

On the economic data front, the release of US durable goods orders, due late during early NA session, would now be looked upon for some fresh trading impetus.

Technical levels to watch

A follow through weakness below 0.7170-65 area is likely to drag the pair towards the very important 200-day SMA support near the 0.7145 region. On the upside, any recovery attempts might now confront fresh supply near 100-day SMA, around the 0.7240 region, above which the pair could aim towards reclaiming the 0.7300 handle.