The NZDUSD pair declined by about 70 basis points even as New Zealand released upbeat retail sales numbers. The pair is trading at 0.6494, which is significantly below this week’s high of 0.6580. The decline was partly due to the overall strong US dollar following the FOMC rates decision yesterday. The US dollar index is up by 30 basis points.
New Zealand retail sales bounce back
New Zealand was widely praised for how it dealt with the coronavirus pandemic. The country enforced one of the most significant social distancing policies by deploying the police in key areas. As a result, the country of more than 5 million people had less than 1,600 total infections and less than 100 deaths. Also, the NZDUSD pair has gained by more than 7% in the past month alone.
This month, the government announced an end to social distancing and stay-at-home orders. It also announced that people would be free to return to work.
According to the statistics office, retail sales bounced back in May as more people went out shopping. Debit and credit card transactions increased by a whopping 79%, returning to pre-pandemic levels. Total spending rose to more than NZ$5.2 billion, up from NZ$2.9 billion in April. This growth was propelled by a significant increase in groceries and alcohol as supermarkets and groceries reopened. In a statement, the statistics office said:
“Supermarkets and grocery stores were open as an essential service throughout the lockdown and have seen strong consumer spending.”
Meanwhile, the government will start to allow large sporting gatherings and movie cinemas this week.
The NZDUSD pair has found significant resistance above the 78.6% Fibonacci retracement level on the daily chart. The pair is above the 50-day and 100-day exponential moving averages. The pair also seems to have topped as shown in the chart below. This means that I expect the pair to have a pullback as bears attempt to test the 61.8% retracement level at 0.6258.
On the flip side, a move above this week’s high of 0.6585 will send a signal that there are more buyers in the market, who will be keen to push it at the YTD high of 0.6750.