NZD/USD consolidates last week's gains, trades below 0.6750

• NZD/USD stays quiet following last week's impressive rally.
• Greenback struggles to gather strength as market mood turns upbeat.
• There won't be any high-impact macroeconomic data releases on Monday.

The NZD/USD pair capitalized on the heavy selling pressure surrounding the greenback last week and gained more than 200 pips to post its highest weekly close since mid-July at 0.6742. In the absence of significant fundamental drivers at the start of the week, the pair seems to have gone into a consolidation phase and was last seen registering small daily losses at 0.6732.

DXY struggles to stage a meaningful rebound

Last week, FOMC Chairman Jerome Powell announced that the Fed has decided to adopt average inflation targeting (AIT) and triggered a USD selloff. The US Dollar Index (DXY) lost nearly 1% last week and stays flat around 92.30 on Monday.

Commenting on the Fed's policy shift, “despite the Fed adopting AIT, the strategy on its own does not boost inflation so the US is still beholden to developments in COVID-19 and prospects on economic recovery to provide an uplift to inflation expectations," said UOB analysts. 

Later in the day, the Federal Reserve Bank of Dallas' Manufacturing Business Index will be the only data featured in the US economic docket. Additionally, Federal Reserve's Vice Chairman Richard Clarida is scheduled to deliver a speech at 1300 GMT.

In the early trading hours of the Asian session on Tuesday, the Reserve Bank of Australia will release its policy statement and announce the interest rate decision. A sharp reaction in the AUD/USD pair could impact the positively-correlated NZD/USD's movements.

Technical levels to watch for