New Zealand Dollar Gains Ahead of Key Consumption Report - Trading Opportunity?

The New Zealand dollar dominated the majors on Thursday, even beating out the Japanese yen, ahead of the release of key economic data at 18:45 ET. Focusing on NZDJPY, the pair made a bullish break above a falling trendline last week 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. Now that we’ve seen NZDJPY pull back for a test of this former resistance point (now support), and with daily RSI down from overbought levels, there may be a potential buying opportunity, especially if fundamentals underpin a move to the upside overnight.

While the monthly reading of New Zealand retail sales for June is 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. As a result, a rise in quarterly retail sales that meets or is better than forecasts should offer a boost to the New Zealand dollar, but if spending surprisingly contracts for the sixth straight quarter, the currency may tumble.

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