NZD/USD turned higher in the Asian session and extended gains after US CPI data fell short of expectations.
The consumer price index was reported to rise 0.1% in July which was short of an expected rise of 0.2%. The data release triggered a broadly weaker dollar with NZD/USD rising from 0.7286 to resistance at 0.7311.
The pair pulled back from resistance as the dollar recovered shortly after the release, retreating back towards levels seen ahead of the data. NZD/USD has since recovered and is seen attacking resistance at 0.7311 once again.
Slightly above the horizontal level, further resistance is seen in the form of a declining trend channel. The channel has contained price action since the start of the month.
The US dollar index (DXY) is on track to post a third day of losses, weighed by the disappointing data. The index is likely to post a small loss this week, failing to follow through on the reversal candle print last week.
NZD/USD is on track to post a second consecutive weekly loss. Near-term resistance from the upper line of the declining trend channel will be important. A breach above the pattern suggests the correction from the July 27th high has completed.
The weekly close will also be important as the 0.7311 level is a respected level on a weekly chart. A hold above the level will be encouraging for bulls.