NZDUSD in focus ahead of New Zealand retail sales

Potentially market-moving data from New Zealand will be the main point of focus once trading on Wall Street ends tonight. At 21:45 GMT, Statistics New Zealand will report the latest quarterly sales data, which should have an impact on the kiwi. Analyst expect sales to have risen by 1.4% in the fourth quarter compared to 0.2% in Q3. Core sales are seen rising 0.7% compares to 0.5% previously. We think analyst might be too optimistic in their forecasts and a disappointment might be on the card. If so, the New Zealand dollar – which has outperformed other commodity currencies lately – could come under some pressure. Conversely, if the data beats then the kiwi’s outperformance will be justified.

Ahead of the retail sales data, the NZD/USD is in consolidation mode, trading between 0.7310 support and 0.7435 resistance. There’s no doubt that the trend has been bullish for the Kiwi this year, as price continues to hold above its 21, 50 and 200 day moving averages. These averages are all pointing high and reside in ascending order, objectively telling us that the trend is indeed bullish. Most recently, the NZD/USD formed what appears to be a possible double top at 0.7435. This means that there’s plenty of liquidity (buy stop orders) now resting above this level as bearish traders speculate on falling prices. Thus, in the event that retail sales come out ahead of expectations tonight then the resting liquidity above 0.7435 could be where price might want to reach for. Specifically, 0.7450 – the mid-figure – might be a decent short-term bullish target. Additional bullish targets are seen at 0.7500 – a psychologically important level – with last year’s high at 0.7557 being the subsequent target.

However, if the data comes out weaker, then the kiwi may fall to probe liquidity below 0.7310 support, next. If there’s acceptance below 0.7310 support then treat this as a warning sign that the bull trend may be about to end. In this potential scenario, the 0.7180-0.72000 region would then become the next area of interest for this was previously support and resistance.