- New Zealand Retail Sales report expected to show more economic contraction.
- The RBNZ is prepared to take extra steps to support the economy.
- New Zealand plans to start reopening its economy.
The NZD/USD was off to a bearish start on Monday morning, indicating that the New Zealand dollar lost some ground against the U.S dollar. This indicates the lack of investor confidence in the NZD or cautious approach ahead of New Zealand’s upcoming retail sales report from the first quarter. The private sector consumption data for Q4 of 2019 expanded by 0.7%, but Q1 2020 data is expected to indicate that it contracted by roughly 1.5%.
Time : 18/05/2020
Pivot : 0.5944
Technical review : Long above 0.5964
Target : 0.5982, 0.5987 and 0.6011
Technical review : Short below 0.5924
Target : 0.5914, 0.5901
Comments : Neutral
Last Price : 0.5945
The NZD/USD’s demand zone is expected within 0.5864 and 0.6058, and the supply zone is expected between $ 0.5994 and $ 0.5801. The Reserve Bank of New Zealand (RBNZ) expects the upcoming retail sales report to indicate contraction. As such, it is ready to take the necessary steps to provide economic support. It is prepared to increase its spending for the Large Scale Asset Purchase (LSAP) program from NZ$33 billion to NZ$60 billion. The Monetary Policy Committee has also expressed its willingness to deploy every monetary policy tool necessary. This may include lowering the official cash rate even more.
The NZD/USD exchange rate might be in for some interesting times head especially with the New Zealand government’s current plans to reboot the country’s economy. However, it is not in a rush to deploy a negative interest rate contrary, which many analysts have speculated is likely to be a possible direction.
The RBNZ likely plans to see how expanding the LSAP program affects the economy before determining the next course of action. However, there is still speculation about the possibility of a negative interest rate policy, and that will likely continue to weigh down on the NZD/USD.