NZD/USD: Off 7-week highs, but bull bias intact

• Kiwi has backed off from the 7-week high of 0.7376.
• But, the outlook remains bullish as indicated by bull flag breakout.

NZD/USD risks falling into the red, now trading just a couple of pips above the opening price of 0.7358.

The currency pair clocked a seven-week high of 0.7376 (highest since Feb. 21) as fading prospects of a full-fledged US-China trade war put a bid under the commodity dollars and risk assets in general.

However, the sharp rally from 0.7241 (April 6 low) to 0.7376 pushed the hourly and 4-hour relative strength index (RSI) into overbought territory (above 70.00). This explains the pullback from 0.7376 to 0.7360. Also, dismal China inflation readings are not helping the matters either.

That said, the overall outlook remains bullish, courtesy of the bull flag breakout - a bullish continuation pattern. Accordingly, the spot looks set to scale 0.7437 (Feb. 16 high) in the short-run. The Kiwi may regain bid tone if the US S&P 500 futures turn positive. As of writing, the futures indicate the benchmark index will likely open on a negative note.

NZD/USD Technical Levels

A break above 0.7376 (overnight high) could see spot test supply around resistance lined up at 0.74 (multiple daily highs) and 0.7437 (February high). On the downside, acceptance below 0.7355 (March 13 high) may allow a deeper pullback to 0.73 (psychological mark), although only a close below 0.7266 (Monday's low) would abort the bull view.