NZD/USD: Here’s why the kiwi dropped after strong NZ retail sales

The NZD/USD pair declined sharply even after the relatively positive New Zealand retail sales numbers. The pair fell to 0.6975, which was significantly lower than last week’s high of 0.7088.

New Zealand retail sales

The New Zealand economy is in a good place. The country has not reported a single Covid case in the past few months and many businesses are currently open. The only challenge for the country is that the tourism sector remains under pressure since the government is yet to reopen its airports to most countries. 

The NZD/USD price retreated on Tuesday even after the country published the relatively strong economic numbers. According to Statistics New Zealand, card retail sales jumped by 0.9% in July after rising by 0.9% in the previous month. The sales rose by 4.7% on a year-on-year basis. Precisely, New Zealanders spent more than N$8.528 billion in July, which was about N$77 million above the previous month.

The total spending rose across all segments except the services sector, which saw a 0.5% drop. The best performer was apparel followed by fuel, consumables, and motor vehicles.

Other recent numbers from New Zealand have been relatively strong. For example, the unemployment rate declined sharply to 4.0% in the second quarter as the country continued to recover. This decline was substantially lower than the previous quarter’s 5.3%.

Therefore, the NZD/USD weakness was mostly because of the relatively strong US dollar. The greenback has jumped recently after the strong US non-farm payrolls. The data showed that the American economy added more than 940,000 jobs in July and that the unemployment rate fell to 5.3%. The pair will next react to the latest US inflation data that will be published on Wednesday.

NZD/USD technical analysis

The NZDUSD price has been under intense pressure after it rose to a high of 0.7088 last week. The pair broke below the key support at 0.7044, which was the highest level on July 15. It moved below the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has been in a downward trend. 

Therefore, the pair will likely maintain the bearish trend as investors target the next key support at 0.6922. A move above the now-resistant at 0.7045 will invalidate the bearish view.