NZDUSD might be done with its climb as price is forming a head and shoulders pattern on its 4-hour chart. A break below the neckline around the .7150 minor psychological mark could set off a drop that’s the same height as the formation.

The chart pattern spans around 150 pips, possibly taking NZDUSD down to the .7000 handle on a neckline break. However, the 100 SMA is above the 200 SMA to suggest that support is still more likely to hold than to break.

Price has broken below the 100 SMA dynamic inflection point as an early indication of selling pressure, but it has yet to fall below the 200 SMA as additional confirmation. The gap between the moving averages is also narrowing to reflect weakening bullish momentum.

Stochastic is already pulling higher to show that buyers are taking control while exhausted sellers take a break. RSI is moving sideways, though, so consolidation could be seen.

The US dollar could take cues from the flash PMI releases due before the end of the week, as strong improvements could underscore the Fed’s slight bias towards tapering. After all, the latest inflation reports turned out much stronger than expected, which suggests that the economy is already recovering.

Meanwhile, the Kiwi might be pushed around mostly by risk sentiment, possibly spurring from geopolitical tensions in the Middle East and the surge in COVID-19 cases in India. After all, any disruption in global economic activity and the possibility of more lockdown measures could weigh on business outlook.

Any easing of tensions or dropping of confirmed cases might bring risk appetite, which would be bullish for the higher-yielding Kiwi. On the other hand, worsening conflict and rising COVID-19 cases could boost risk-off flows which would drag the Kiwi lower.