NZD/USD: Bullish bets on New Zealand dollar hit highest level since March

NZD/USD: Bullish bets on New Zealand dollar hit highest level since March
Written by:
Crispus Nyaga
24th August, 10:12
  • The NZD/USD pair is little changed even after disappointing retail sales numbers from New Zealand.
  • The data showed that retail sales dropped by almost 15% in the second quarter.
  • The pair is also reacting to news that the government extended the lockdown in Auckland.

The NZD/USD is little changed today as investors react to the decision by the government to extend lockdown in Auckland. The pair is also reacting mildly to the disappointing retail sales numbers released earlier today. The pair is trading at 0.6540, which is slightly higher than last week’s low of 0.6490.

NZD/USD little changed

New Zealand extends lockdown

New Zealand was the first country to declare victory against the coronavirus illness in May. This victory led the New Zealand dollar to rise sharply against other currencies, including the euro and the US dollar.

Are you looking for fast-news, hot-tips and market analysis? Sign-up for the Invezz newsletter, today.

However, the country confirmed its first case in three months early this month. Since then, the country has confirmed 150 new infections and announced a lockdown in Auckland, its capital city.

In a statement today, Jacinda Arden, the country’s prime minister said that the lockdown would continue until Friday this week. She also said that all people will be required to wear masks in public transport for the foreseeable future. Also, the country will limit gatherings to ten people and schools will remain closed. “We want both confidence, and certainty for everyone,” she said.

New Zealand retail sales fall

The virus has had serious impacts on the New Zealand economy. Analysts expect that the economy contracted by a record 13% in the second quarter. That will be the worst contraction ever recorded but it will be better than the 32.9% decline in the United States.

Earlier today, the NZD/USD pair reacted mildly to the country’s disappointing retail sales numbers. According on the statistics bureau, retail sales declined by a historic 15% in the second quarter, the lowest level in 25 years. This unprecedented decline was mostly because of a sharp contraction in vehicles, accommodation, fuel, and restaurant spending.

For example, food and beverage sales dropped by 40% to $1.2 billion while fuel retailing fell by 35% to $770 million. The decline was partially offset by a 12% increase in supermarket and grocery stores as people stockpiled because of the lockdown.

These results came a few weeks after the Reserve Bank of New Zealand (RBNZ) left interest rates unchanged and expanded their quantitative easing program. Now, analysts at ANZ Bank predict that the bank will slash interest rates to -0.25% inn April next year. Also, analysts at ASB expects the bank will take rates to -0.50% early next year.

Meanwhile, hedge funds and other speculators are increasingly bullish on the New Zealand dollar. According to the CFTC, bullish bets on the New Zealand dollar increased to 3.8K in the previous week. That was higher than the previous -0.2k. It was the highest it has been since March 2019.

NZD/USD technical outlook

NZD/USD technical chart

The daily chart shows that the NZD/USD pair reached a YTD high of 0.6711 in July this year. Since then, the price has been in a slow downward trend, and is now trading at 0.6545. This price is a few pips above the 50-day exponential moving averages. It is also slightly above the 100-day EMA. Also, its volatility has remained at the lowest level since March this year.

Therefore, a move below the 50-day EMA will send a signal that bears have prevailed, which will push the price lower, potentially to the support at 0.6380.

Invezz uses cookies to provide you with a great user experience. By using Invezz, you accept our privacy policy.