Technical correction? NZD/USD retakes 0.70 handle

• Kiwi is back above 0.70 possibly due to oversold conditions.
• Bullish relative strength index divergence is seen in the hourly chart.
• China manufacturing PMI bettered estimates, but export orders dropped.

The NZD/USD is reporting marginal gains on Wednesday as sellers seem to have run out of steam.

As of writing, the pair is trading at 0.7012 and looking north as per the bullish RSI divergence as seen in the hourly chart. Further, the daily RSI shows oversold conditions. So, a corrective rally could be in the making.

However, the gains could be short-lived as the probability that the Fed will raise interest rates three more times this year is now approaching 40 percent, compared to 20 percent seen in the beginning of last month. So, it appears the 10-year treasury yield will likely find acceptance above 3 percent, leading to another leg higher in the USD.

Further, China Caixin manufacturing PMI released today showed the export orders dropped for the first time since November 2016, signaling a possible slowdown in the near-term. Hence, Kiwi and other commodity dollars could remain under pressure.

Focus on Fed

Kathy Lien from BK Asset Management expects the USD to catch a bid if the Fed signal June rate hike. The central bank is widely expected to keep interest rates unchanged today.

NZD/USD Technical Levels

A break above the descending 0.7032 (hourly 50-MA) would open up upside towards 0.7050 (hourly 100-MA) and 0.7095 (April 26 high). On the downside, a close under 0.70 (psychological support) could yield 0.6954 (Dec. 20 low) and 0.6945 (Nov. 28 high).