NZD steady as Retail Sales rises

The New Zealand dollar is in positive territory on Monday. In the European session, NZD/USD is trading at 0.7175, up 0.19% on the day. The pair is coming off a rough week, falling 1.16%. This marked its worst weekly performance since March.

New Zealand Retail Sales rebound

After the double-digit readings we saw in Q2 and Q3 of 2020, Retail Sales has steadied and is showing less volatility. The fourth-quarter drop of 2.7%, was worse than expected, but the news was much better for Q1, with a solid gain of 2.5%. The consensus was -1.8%, and the surprising gain has lent a slight boost to the New Zealand dollar on Monday. The strong reading points to increased consumer spending, reflecting strength in domestic economic conditions.

RBNZ expected to hold the course

The Reserve Bank of New Zealand holds its policy meeting on Wednesday. New Zealand data has been strong, but there are concerns of reflation as Covid continues to decline. Goldman Sachs said in a research note that they expect the bank to maintain monetary policy and that the bank will send a dovish message, but could revise lower the unemployment rate. Investors will be listening carefully to the wording of the rate statement and looking for any hints of potential tapering of QE, given the strong recovery. Any hints that a tightening of policy could be considered sooner rather than later would be bullish for the New Zealand dollar.

Markets will be looking for hints of potential QE tapering given the strength of the NZ recovery. That could send NZD sharply higher.

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NZD/USD Technical

NZD continues to trade in choppy ranges, reflective of global risk sentiment, which is shifting on a daily basis. A significant drop in risk sentiment could send NZD sharply lower.

• NZD/USD faces resistance at 0.7239. Above, there is resistance at 0.7314
• There is support at 0.7120 and 0.7076

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