NZD/USD gained strong traction for the fifth consecutive session on Tuesday. Sustained break through the 0.7100 confluence hurdle favours bullish traders. Overbought conditions warrant some caution before placing fresh bullish bets. The NZD/USD pair continued scaling higher through the early European session and shot to over one-month tops, around the 0.7145-50 region in the last hour. The safe-haven US dollar witnessed aggressive selling on Tuesday and sank to three-week lows amid the dominant risk-on flow. This, in turn, provided a strong boost to the perceived riskier kiwi and assisted the NZD/USD pair to gain strong follow-through traction for the fifth successive day.
The momentum confirmed a bullish breakout through the 0.7100 confluence, comprising the very important 200-day SMA and a descending trend-line extending from YTD tops touched in February. A subsequent move beyond the 50% Fibonacci level of the 0.7466-0.6805 downfall has set the stage for further gains.
Meanwhile, technical indicators on hourly charts are already flashing overbought conditions. Moreover, RSI on the daily chart has moved on the verge of breaking into the overstretched territory, warranting some consolidation or a modest pullback before the next leg up for the NZD/USD pair.
From current levels, September monthly swing highs, around the 0.7170 region, seems to act as immediate resistance. A sustained move beyond has the potential to push the NZD/USD pair towards the 0.7200 round-figure mark en-route the 61.8% Fibo. level, around the 0.7215-20 area.
On the flip side, any meaningful retracement slide could attract some dip-buying near the 0.7100 confluence hurdle breakpoint. This, in turn, should help limit the downside near the 0.7070-60 region, which coincides with the 38.2% Fibo. level and act as a strong base for the NZD/USD pair.