While the New Zealand Dollar (NZD) might have been the most dramatic currency Friday, its relative strength was astonishing. It notched its biggest one-day move since June, up 0.82%. This increase occurs as the currency recently challenged important support levels, especially at 0.5860 vs USD. The currency’s upward trajectory is further bolstered by new data showing a positive shift in New Zealand’s retail sales.
Recent trading activity of the NZD/USD currency pair has been indicative of the pair’s current state, especially as it continues to trade around notable support and resistance levels. Similarly, the NZD/USD was testing 0.562 at the close of the most recent European session. It had dipped down 0.07% earlier in the day. Friday’s impressive performance has raised expectations anew. A lot of people are thinking that the NZD will go even higher in the short term.
Retail Sales Data Boosts Optimism
New Zealand’s retail sales for the second quarter showed an impressive increase of 0.5% q/q, much better than the earlier expectations. That’s a significant increase from the 0.7% GDP growth seen in that first quarter of this year. Retail sales, meanwhile, are up a blistering 2.3% Y/Y. This national increase is reflective of a strong consumer spending climate that will further support the national economy.
Encouraging retail sales numbers have helped to provide the NZD with a deserved lift. Ultimately, market participants are still reeling to economic data coming in that continues to demonstrate strong consumer resilience and activity. Analysts are calling this strong growth a confirmation of New Zealand’s economy continuing to develop sustainability, in the face of worldwide economic uncertainty.
Federal Reserve’s Influence on Currency Movements
The movement of the NZD/USD in recent weeks has been primarily a function of external influences. Most importantly perhaps, the influence of Federal Reserve Chairman Jerome Powell on the US employment outlook has been very influential. As a result, his comments have led to very heated speculation by many. Everyone is expecting the Fed to cut rates even more at their next meeting on September 17. This expectation has weighed heavily on the US dollar, which has seen steep losses across the board, including the NZD.
As traders continue to digest Powell’s warnings, they’re rethinking their positioning heading into what looms as a potentially unprecedented shift in monetary policy. The anticipation of a second rate reduction before the year’s close would likely exacerbate any turmoil we’d see in the currency markets. This unique setting creates opportunities for complementary currencies such as the NZD to thrive even in the face of USD weakness.
Key Support and Resistance Levels
As the NZD/USD trades amid these market forces, it is important to pay close attention to significant technical levels. Immediate support for the pair seen at 0.5854 and 0.5843. These new important technical thresholds would have a big impact on trading sentiment should they be broken. On the other hand, 0.5871 and 0.5877 resistance lines offer hurdles for the traders to watch for, notably after Friday’s jump higher.
Traders and analysts alike will be keeping a close eye on these levels as they recalibrate strategies in the months ahead. A sustained move higher through resistance may see further upside for the NZD. If we can’t hold above support this may be the first sign that momentum is about to turn higher.