NZD/USD remains pressured below 0.7200 ahead of NZ Retail Sales

• NZD/USD marked two-week downtrend with Friday’s mild losses.
• Reflation, tapering concerns returned to the table on strong PMIs and Fedspeak.
• Today’s New Zealand Retail Sales can help forecast GDP, become the key for Wednesday’s RBNZ.

NZD/USD keeps Friday’s sober mood, heavy around 0.7170 recently, amid the early Monday morning in Asia. The kiwi pair dropped the previous day as fears of the Fed’s policy adjustments favored the US dollar to portrays a corrective pullback from early January levels.

Will strong Retail Sales trigger RBNZ moves?

Friday’s upbeat PMIs from the US added to the Federal Reserve (Fed) official’s worries and the concerns over the tapering also mount for the Reserve Bank of New Zealand (RBNZ) board members. However, today’s New Zealand (NZ) Retail Sales for the first quarter (Q1) could save Governor Adrian Orr and the company if matching the downbeat forecast of -4.4% QoQ, versus -2.7% prior, as well as +1.9% for YoY compared to +4.8% previous readouts.

Record activity jump in the US pushed Atlanta Federal Reserve President Raphael Bostic and Philadelphia Fed President Patrick Harker to join the line of Dallas Federal Reserve Bank President Robert Kaplan while citing inflation fears and the need to act. Worries surrounding the Fed action joined the slump in cryptocurrencies to weigh on Antipodeans and commodities, except for gold that benefited from safe-haven bids.

While the Fed policymakers have recently been cautious on their approach and try to defend the current status quo, a similar path could be expected for the RBNZ policymakers should today’s Retail Sales offer a positive surprise. Though, RBNZ Governor Orr may wait for the Fed and cite recently mixed data at home to defend the New Zealand central bank’s inaction.

Other than Retail Sales, New Zealand’s recent jitters with China, due to joining the lines of the UK and the US, as well as the recently witnessed airplane hijacking in Belarus, may also negatively affect the market sentiment.

Alternatively, Auckland’s lead to tame the coronavirus (COVID-19) seem to safeguard the NZD/USD bulls.

Amid these plays, Wall Street closed mixed on Friday and the US Treasury yields were also sluggish.

Looking forward, NZD/USD traders will keep their eyes on today’s NZ Retail Sales (Q1) for immediate direction. However, major attention will be given to Wednesday’s RBNZ meeting.

Technical analysis

NZD/USD forms a bearish head-and-shoulders chart pattern that needs confirmation by a downside break of 0.7140 to direct sellers, theoretically, towards the sub-0.7000 region. Meanwhile, 0.7270 and 0.7310 restrict the kiwi pair’s short-term upside.