NZD/USD forms bearish flag pattern as NZ retail sales jump

The NZD/USD pair tilted upwards after the latest New Zealand retail sales data. It is trading at 0.6780, which was slightly above Tuesday’s low of 0.6755. It is still about 9% below the highest level in 2021.

New Zealand retail sales

Retail sales are an important part of the economy. They are an important gauge of a country’s consumer spending, which is the most important part of the economy. Also, the retail sector is the biggest employer in most countries.

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The NZD/USD tilted higher after the latest retail sales data. According to the country’s statistics agency, electronic card sales rose by 0.4% in December after rising by 9.5% in the previous month. On a month-on-month basis, sales rose by 4.2%, which was better than the previous 2.9%.

The strong electronic card sales was mostly because of holiday shopping, which recorded strong growth this year. Also, people increased their spending because of the overall fear of new Covid-19 lockdowns.

These numbers send a signal that the Reserve Bank of New Zealand (RBNZ) will maintain its hawkish tone in this year. It was among the first big central banks to end its quantitative easing program and hike interest rates.

Rising bond yields

The NZD/USD price has declined in the past few days because of the overall strong dollar. The greenback has jumped sharply recently as investors focus on the bond market.

On Tuesday, the bond market sell-off accelerated as investors remained fearful about the Federal Reserve. The 10-year bond yields rose to a two-year high of almost 2%. The same happened in the 30-year bond yields.

These numbers are a response to talks that the Federal Reserve will accelerate its hawkish tone in the near term. It has already started tapering its asset purchases and analysts expect it will hike rates by about 4 times this year.

NZD/USD forecast

The daily chart shows that the NZD/USD pair has been under intense pressure lately. It has formed a bearish flag pattern that is shown in black. At the same time, the pair has moved slightly below the 25-day and 50-day moving averages. 

Therefore, the pair will likely have a bearish breakout in the near term. If this happens, the next key support to watch will be at 0.6700.