NZD/USD erases Monday's gains, extends slide toward 0.7000

• NZD/USD is falling sharply after closing in the positive territory on Monday.
• US Dollar Index stages a modest rebound on Tuesday.
• S&P 500 Futures edge lower following record-setting rally.

The NZD/USD pair started the new week on a firm footing and posted its highest daily close in nearly two weeks at 0.7650. However, the pair lost its traction on Tuesday and was last seen losing 0.61% on a daily basis at 0.7012.

DXY rebounds as market mood sours

On Monday, the risk-positive market environment made it difficult for the greenback to find demand and provided a boost to NZD/USD. The US Dollar Index lost 0.5% and closed at 92.57 as the Dow Jones Industrial Average and the S&P 500 indexes both notched new all-time highs.

The data from the US showed that the ISM Services PMI rose to 63.7 in March, compared to analysts' estimate of 58.5, and allowed risk flows to remain in control of financial markets in the second half of the day.

On Tuesday, investors seem to have adopted a cautious tone with the S&P 500 Futures losing 0.25% on the day. Consequently, the DXY is rising 0.2% at 92.75 and weighing on NZD/USD.

Later in the session, the IBD/TIPP Economic Optimism Index and JOLTS Job Openings will be featured in the US economic docket. Nevertheless, investors are likely to ignore these data and remain focused on risk perception. Meanwhile, the bi-weekly Global Dairy Trade Auction will take place in New Zealand in the early American trading hours.

Technical levels to watch for