NZD/USD plummets to 0.6450 on downbeat NZ Q1 Retail Sales, focus on US PMIs, Fed’s Powell

• NZD/USD takes offers to renew intraday low, consolidates recent gains around 13-day top.
• New Zealand Q1 Retail Sales flashed -0.50% figures versus 8.3% prior growth.
• Firmer sentiment, repeated Fedspeak keeps US dollar on the back foot.
• First readings of S&P Global PMIs for May, speech from Fed Chairman Powell can entertain traders ahead of RBNZ.

NZD/USD stands on slippery grounds, snapping a three-day uptrend at a fortnight top, as New Zealand’s (NZ) Q1 2022 Retail Sales disappoints Kiwi bulls ahead of Wednesday’s key RBNZ. That said, the quote renews a daily low of around 0.6450 during the initial hour of Tuesday’s Asian session.

New Zealand’s first quarter (Q1) 2022 Retail Sales surprised kiwi bulls with a -0.5% QoQ figure versus the downwardly revised previous readings of 8.3% QoQ (from 8.6%). That said, Retail Sales ex Autos also dropped to 0.0% from 6.8% prior during the stated period.

The downbeat numbers raise allow NZD/USD bulls to better prepare for the Reserve Bank of New Zealand’s (RBNZ) widely anticipated rate hike of 50 basis points (bps).

It’s worth noting that a negative start of the day by the S&P 500 Futures, despite firmer closing of the Wall Street benchmarks, also weigh on the Kiwi prices of late.

On Monday, the NZD/USD rallied to a three-week high amid broad US dollar weakness, as well as optimism in the market during a light calendar. In doing so, the US Dollar Index (DXY) extended the first weekly loss in seven as mixed covid signals from China, mostly positive, join the repeated Fedspeak around a 50 bps rate-hike, contrary to the recently hawkish comments from the ECB policymakers. Also weighing on the greenback were the headlines from Japan where US President Joe Biden mentioned that he is considering reducing tariffs on China.

Looking forward, the preliminary readings of the S&P Global Manufacturing and Services PMIs for May will be crucial amid hopes of stabilization in the market’s confidence. Also, Fed’s Powell is always the key catalyst to move the markets and can do so if refrained from the usual support for a “normal” rate hike trajectory. Additionally, headlines from the Quad Summit in Tokyo and concerning the covid will also be important for NZD/USD traders to watch for fresh impulse.

Above all, tomorrow’s RBNZ Interest Rate Decision will be crucial as markets do expect a 50 bps move but data from New Zealand has been mixed of late.

Technical analysis

NZD/USD trades above the 21-DMA, around 0.6400 at the latest, for the first time in seven weeks. The weekly recovery move from a two-year low also gains support from the MACD and RSI (14) to direct buyers towards January’s low surrounding 0.6530.