On Monday, traders bought the New Zealand dollar, also known as the Kiwi, and it managed to rise back above the critical support of 0.69 in the European trading session. Overall, it looks like commodities will continue in their gains, likely supporting commodity currencies as the mood in the markets remains positive.
New Zealand data strengthened NZD
Earlier in the day, New Zealand retail sales for the second quarter jumped more than expected and beat expectations, rising to 3.3% quarter-on-quarter, up from 2.8% in the year’s first quarter. Retail sales ex-autos soared from 6.6% to 33.3%. However, since New Zealand is locked down again for a couple of days/weeks, retail sales will most likely deteriorate notably during this quarter.
Nevertheless, the NZD/USD pair managed to make pretty gains as it traded half a percent stronger during the London session, rising above 0.6930. Traders will also focus on the trade balance figure from New Zealand, due later tonight. As a result, volatility might be elevated again.
“The Reserve Bank of New Zealand (RBNZ) remains on track to begin its tightening cycle as early as this October amid COVID-19 lockdown and rising house price inflation.”
Somewhat hawkish comments from Bascand helped to support the NZD against the USD. The US calendar offers only new home sales for July today, expected to improve marginally to 0.69 million.
Technical situation remains unclear
The Kiwi dropped below the previous strong support of 0.69, cleared out stop-losses of long positions, and marched back above that level. It is usually considered a bullish signal when this happens since the breakdown to new lows was only a false one.
Therefore, as long as the NZDUSD pair trades above the 0.69 level, the short-term outlook seems bullish, targeting the next resistance at 0.6950, where the 21-day exponential moving average is. If that area is breached to the upside, the next level to watch stands at 0.70. There is also a notable bullish divergence between the MACD indicator and the price, supporting the bullish bounce for now.
On Monday, the greenback lost ground as investors sold it notably ahead of the Jackson Hole Symposium, starting Thursday. Since some of the macro data came out weaker than expected lately, investors now speculate that the tapering won’t start as soon as previously thought, possibly undermining the US dollar against other currencies.