The kiwi recovered earlier losses to start the trading week after Stats New Zealand reported first quarter retail sales (seasonally adjusted) of 1.5%, a strong beat of the expected 0.9% analysts’ consensus. Nine of the 15 industries had higher sales volumes. The motor-vehicle and parts retailing industry had record increases in both sales volume and value.
Despite the small rally, market participants are still focusing on last week’s Reserve Bank of New Zealand (RBNZ) interest rate decision. The RBNZ kept the Official Cash Rate unchanged at 1.75% and gave a more dovish message. The RBNZ noted that monetary policy will remain accommodative for a considerable period. Numerous uncertainties remain and policy may need to adjust accordingly.
Price action on the NZD/USD daily chart highlights last week’s tumble following the RBNZ rate decision. Since respecting the 50-day SMA in the middle of April, price has consolidated around the .6830 to .6970 region. If price breaks below the .6800 level, we could see a major move down toward the .6750 level. It is around that area that price could form a bullish ABCD pattern. Key resistance remains .7000 to .7150 zone.
The Trade: Buy NZD/USD at .6775 with a stop loss at .6725 and a take profit at .6825. The Risk/Reward Ratio is 1:3