China retaliates to US tariffs, NZD/USD drops

• China imposes retaliatory tariffs on US imports.
• Kiwi drops on trade war fears, Yen picked up a bid on risk aversion.

China has slapped extra tariffs of up to 25 percent on 128 US products including frozen pork, wine and certain fruits and nuts, in response to US duties on imports of aluminum and steel.

The resulting risk aversion in the US stocks pushed the Japanese Yen higher across the board. The NZD/JPY pair dropped to a seven-day low of 76.19 in Asia, dragging the NZD/USD lower with it.

As of writing, the NZD/USD is trading at 0.7207, having clocked a session low of 0.7195 earlier today. Ahead in the day, the kiwi dollar may regain poise as the S&P 500 futures are up 0.35 percent, indicating the stocks are likely to regain poise following Monday's sell-off.

That said, China's retaliatory tariffs indicate the trade wars are escalating, hence uptick in the stocks (and Kiwi dollar) could prove transient.

NZD/USD Technical Levels

A close below 0.7183 (200-day moving average) would signal a revival of the sell-off from the recent high of 0.7303 and could yield a sustained move lower to 0.7131 (Aug. 31 low) and 0.71 (psychological mark).

On the higher side, a move above 0.7248 (March 30 high) would allow a re-test of 0.7303 (March 27 high) and 0.7355 (March 13 high).