NZD/USD
NZD/USD

NZD/USD is trading higher after strong New Zealand retail sales data. According to Statistics New Zealand, retail sales in the country surged by 2.5% in Q1’21. This is after a decline of 2.7% in 2020’s fourth quarter. On a year-on-year basis, the retail sales have risen by 6.8% compared to the prior quarter’s 4.8%.

Besides, with the exclusion of food and energy components, core retail sales were up by 3.2% compared to the prior reading of -2.9%. By industry, sales of recreational goods surged by 16% while electrical and electronic goods were up by 8.4%. In the prior release, these sectors had their retail sales fall by 14% and 0.3% respectively.

New Zealand has recorded significant economic recovery from the coronavirus pandemic. Subsequently, the government expects the economy to grow by 2.9% in 2021 and 4.4% in 2022. Besides, as part of its budget, its infrastructure spending is expected to reach N$57.3 billion. With over N$11.6 billion set to be spent in the housing sector, the country’s house-price inflation is expected to drop to 0.9%.

With the ongoing and forecasted economic recovery, NZD/USD will be reacting to the RBNZ interest rate decision scheduled for Wednesday. While the central bank is expected to leave rates unchanged, a hawkish tone is likely. This will be a bullish catalyst for the currency pair.  

On the side of the US dollar, the decline in US Treasury yields has weakened the currency. The benchmark 10-year yields have dropped by 0.73% at 1.60. It remains on a downtrend after hitting 1.69 on Thursday. The 30 and 5-year bond yields are also down by 0.90% and 1.21% respectively.  

NZD/USD Technical Outlook

NZD/USD is trading higher by 0.25% at 0.7194. On a four-hour chart, it is trading between the 25 and 50-day exponential moving averages. I expect the currency pair to move higher to 0.7200. beyond that level, the bulls will be targeting 0.7250. On the flip side, it may pull back to find support at 0.7150.

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