NZD/USD clocks 3-month high, holds above 0.72

• USD offered across the board on the China story.
• NZD/USD rises to 3-month high of 0.7230.

The American dollar was offered across the board after reports hit the wires that China may cut its purchases of new US government bonds.

The NZD/USD pair rose to a three-month high of 0.7230 and was last seen trading at 0.7208 levels.

A reduction in Treasury purchases by China (world's largest treasury buyer) would effectively weaken the bid for the USD. A resulting weaker USD could help boost manufacturing jobs in the US.

That said, it is highly unlikely that China could simply reduce its Treasury purchases, given its huge trade surplus. The world's second-largest economy has no option other than channeling back the surplus into treasuries. Thus, the USD sell-off could be short-lived.

NZD/USD Technical Levels

Analysts at Commerzbank write, "NZD/USD has risen to the July-to-January downtrend line at .7181 and also nearly reached the 0.7209 mid-October high. Here it may struggle short term. Further up lies the 61.8% Fibonacci retracement at 0.7261."

"Still further up sits the June high at 0.7347. Immediate upside pressure will be maintained while the currency pair trades above its 0.7073 current January low. While the next lower 0.6980/53 November high and the December 20 low underpin, we will retain our medium-term bullish view."

"Support below the 55-day moving average at 0.6953 comes in at the October-to-December lows at 0.6818/.6780. Only in case of an unexpected drop below the .6780 low being seen would the 2009-17 support line at 0.6705 be in focus."