The New Zealand Dollar is edging higher on Tuesday, basically tracking its Australian counterpart which is climbing on the back of somewhat hawkish Reserve Bank of Australia (RBA) meeting minutes. Technical traders are also responding to oversold conditions that are encouraging weak shorts to trim some of their positions.

At 09:45 GMT, the NZD/USD is trading .6360, up 0.0049 or +0.78%.

While still early in the process, the NZD/USD could be building a support base after testing a major long-term retracement zone at .6231 – .5921 last week. Besides central bank activity, traders are also responding to expectations that China may be ending its lockdowns soon.

US Retail Sales Could Fuel Volatility

Today U.S. retail sales report, due to be release at 12:30 GMT, is expected to show that retail sales increased by 1.0% during April and core retail sales rose by 0.4%. The report will reveal information on how consumers are spending in the wake of inflation hovering near a 40-year high.

A strong report will justify the aggressive tone from the Fed. Treasury yields are likely to rise on the news, which would likely pressure the NZD/USD.

A weak report could be an early sign of economic weakness. Although it probably won’t derail the Fed’s plans for 50-basis point hikes in June and July, it could put a cap on future rate hike expectations. This may weaken the NZD/USD, but more than likely put a lid on any major price advances from current levels.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .6217 will signal a resumption of the downtrend. A move through .6569 will change the main trend to up.

The minor trend is also down. A trade through .6380 will change the minor trend to up. This will shift momentum to the upside.

The minor range is .6380 to .6217. Its 50% level at .6298 is support.

On the upside, the short-term resistance is a pivot at .6393. This is followed by a long-term 50% level at .6467.

Daily Swing Chart Technical Forecast

Trader reaction to .6298 is likely to determine the direction of the NZD/USD on Monday.

Bullish Scenario

A sustained move over .6298 will indicate the presence of buyers. Taking out .6380 will change the minor trend to up and could create the momentum needed to overcome .6393. This could trigger a surge into .6467.

Bearish Scenario

A sustained move under .6298 will signal the presence of sellers. This could trigger a break into the long-term Fibonacci level at .6231, followed by the main bottom at .6217. This is a potential trigger point for an acceleration to the downside with the May 15, 2020 main bottom at .5921 the next major target price.