NZD/USD trapped above and below structure into Retail Sales, breakout possibilities

NZD/USD is currently trading at 0.6535 in a start of the week range of 0.6526 and 0.6536 so far as trades await the Retail Sales data for the second quarter, (Q2).

The bird was ending the week in tight ranges, underpinned by a solid performance on Wall Street as risk appetite continue to fuels the bid despite concerning factors at home.

Analysts at ANZ Bank forecast a troubling time ahead for the New Zealand dollar.

Longer-term we see RBNZ policy settings and the flagging of a negative OCR as a headwind for the Kiwi, USD gyrations notwithstanding.  

There are vulnerabilities masked by the weakness in the US dollar and at closer inspection, the bird has actually been underperforming the dollar bloc ever since the last Monetary Policy Statement., (MPS). In fact, the kiwi has been the worst-performing G10 currency year to date. 

At the previous MPS on the 12th August, the Reserve Bank of New Zealand's message was extremely dovish and the markets expect the RBNZ to deliver on their threat to cut rates to negative which will substantially dampen the bird.

The RBNZ has ruled out changing the OCR before March 2021, but expressed a preference for a package of a lower OCR and a bank ‘funding for lending’ programme, should they conclude that further stimulus is required at that point. We think they will,

analysts at ANZ bank said. 

Today, markets will get an insight to the consumer behaviour pertaining to the coronavirus in the Retail Sales data, a preview for which details the event in more depth, here: 

When is the New Zealand Q2 retail sales data and how could it affect NZD/USD?

NZD/USD levels

Ahead of the event, the price is stuck in a narrow channel and a break and retest of either support or resistance could define the direction for the start of the week.

On the upside, the bird will need to get over a tricky resistance level for prospects of the next upside structure some 50 pips higher guarding 0.66 the figure:

To the downside, the trend line holds the price up, but a retest following a break of the support opens risk to a 50% mean reversion of the recent correction prior to the recent lows:

Meanwhile, from a long term outlook, the weekly chart offers the prospects of a reverse head and shoulders.