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  • NZD/USD pays a little heed to New Zealand’s Q4 Retail Sales contraction.
  • S&P’s upward revision to NZ credit rating adds extra strength to the kiwi that cheers broad risk-on mood, US dollar weakness.
  • All eyes on RBNZ but Powell’s testimony can offer intermediate moves.

NZD/USD halts pullback from April 2018 top around 0.7325 even as New Zealand’s fourth quarter (Q4) Retail Sales try to disappoint kiwi bulls during early Tuesday morning in Asia. The pair buyers seem to cheer US dollar weakness and risk-on mood while turning down the soft economics ahead of the key Reserve Bank of New Zealand (RBNZ) monetary policy meeting, up for Wednesday.

New Zealand’s Q4 Retail Sales eased below 26.7% forecast to -2.7% QoQ, versus 28.0% prior. Details suggest the Retail Sales ex Autos also slowed down from 23% expected 24.1% previous readouts to 4.8% QoQ.

NZD/USD traders seem to wait for the RBNZ’s reaction to the downbeat figures, up for publishing on Wednesday, which in turn portrayed to moves on the data while keeping Monday’s upside momentum. By rising for the third day in a row the NZD/USD crossed the yearly top to rise to the highest since 34 months following S&P’s credit news the previous day. The global rating giant revised New Zealand’s (NZ) credit rating from ‘AA’ to ‘AA+’ in its latest report.

Also backing the kiwi bulls could be the broad market optimism amid mostly steady coronavirus (COVID-19) vaccinations and recovery in the virus data, which in turn allowed economies like the UK and Israel to announce unlock of the covid-led activity restrictions.

It’s worth mentioning that the US-China tussle is back to the table as Beijing started acting as if it wants to renew ties with the new American administration, despite the warning to not meddle the internal issues. The same joins US-Iran tension and anxiety over the US covid stimulus to test the market optimism.

It’s worth mentioning that the jump in the bond yields in the Pacific, around 30 basis points (bps) off-late, probes the NZD/USD bulls but the rally in the US Treasury yields compensate for the worries ahead of the RBNZ.

Against this backdrop, Wall Street closed mixed on Monday while the US 10-year Treasury yields gain 2.2 bps to tease the highest in a year.

Looking forward, NZD/USD traders will watch for Fed Chair Jerome Powell’s bi-annual testimony as an immediate catalyst ahead of tomorrow’s RBNZ. While Powell is likely to reiterate his cautious optimism, RBNZ can be a spoiler amid the mixed messages flashed by the New Zealand Institute of Economic Research (NZIER) ‘shadow board’ and NZ economics off-late.

Read: The Week Ahead: Inflation and the Fed

Technical analysis

The kiwi pair’s ability to close beyond January 2021 top surrounding 0.7316 enables the bulls to eye April 2018 high near the 0.7400 threshold.

 

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