NZD/USD bulls test near 0.6800 but bears could be on the prowell

• NZD/USD bears are moving in following a firm recovery rally. 
• The US dollar will be a focus and US events could be the catalyst. 

At 0.6797, NZD/USD has recovered from New York session lows near 0.6762 following a drop in the US dollar that came as embattled Us stocks bounced back to life later in the day on Wall Street. 

The turn-around on Tuesday followed a three-day holiday weekend after last Friday's sharp rally, as investors waited for economic data due later this week. Nevertheless, the US bulls could be treading carefully in the wake of the greenback's surge to fresh bull cycle highs that marked up 106.79 in the DXY.

''Once again it was global recession fears at work, with the consequent safe-haven demand favouring the USD as oil prices and bond yields both retreated lower,'' analysts at ANZ Bank argued. ''Looking ahead, it is difficult to see FX markets shifting from current USD-centric perspectives ahead of yet more key US data between now and Saturday morning. Technically, the Kiwi’s collapse overnight looks ominous; some caution is required.''

Meanwhile, non-local events are going to be the driver for the antipodeans. US Nonfarm Payrolls is expected to show that Employment likely continued to advance firmly in June but at a more moderate pace after three consecutive job gains of around 400k in March-May, analysts at TD Securities said.

Minutes of the Federal Reserve's June meeting will also be eyed.  ''Persistent high CPI inflation and nascent signs of de-anchoring inflation expectations forced the Fed to amp the pace of rate tightening. The meeting minutes are likely to offer further colour around the Fed's more hawkish reaction function,'' the analysts at TD Securities said. 

NZD/USD technical analysis

The W-formation is a compelling feature of the hourly chart that could be regarded as a reversion opportunity for days traders that might wish to approach the pattern from a lower time frame such as the 1-min chart as follows: