The New Zealand dollar was the strongest of the majors on Monday, rallying nearly 2 percent against the British pound, as 10-year government bond yields soared to 5.927 percent, the highest since June 30, and Credit Suisse overnight index swaps shifted to price in 103 basis points worth of hikes by the Reserve Bank of New Zealand over the next 12 months, up from 88 basis points on Friday. One pair that will be worth watching is NZDJPY, as price made a bullish break above a falling trendline that connected the 2007-2009 highs at approximately 64.50, as well as the 38.2% fib of 97.81-44.23 at 64.67. However, with daily RSI at overbought levels, there is potential for a pullback in the pair to test support at the noted trendline.
On Thursday, the monthly reading of New Zealand retail sales for June are projected to reflect a decline of 0.3 percent, the Q2 result is anticipated to rise by 0.2 percent after a steep 2.9 percent drop in Q1, and it is this measure that could impact the New Zealand dollar the most. While a 0.2 percent increase isn’t remarkable by any means, it would be the first improvement in consumption since Q3 2007 and an encouraging sign that the severity of New Zealand’s recession is easing.
Related Article: New Zealand Dollar Weekly Trading Forecast
Al Bawaba
