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New Zealand Dollar rebounds on strong retail sales, AUD/NZD reversing?

New Zealand Dollar rebounds strongly today after stronger than expected inflation data. Headline retail sales rose 1.1% qoq in Q2 versus expectation of 0.4% qoq. Core retail sales rose 1.4% qoq versus expectation of 0.8% qoq. Australian Dollar was not bad. Westpac leading index rose 0.0% mom in July. Construction work done rose 1.6% in Q2 versus expectation of 0.9%.

However, AUD/NZD suffers heavy selling in Asian session. The break of 1.0991 resistance turned support is a clear sign of near term weakness in the cross. Deeper fall is now in favor back to 38.2% retracement of 1.0486 to 1.1174 at 1.0911. Note firstly that AUD/NZD is bounded in medium term range of 1.0486/1289. The structure of the rise from 1.0486 doesn’t warrant that it’s an impulsive move for break out yet. Bearish divergence condition is seen in daily MACD. Therefore, firm break of 1.0911 should indicate completion of whole rise from 1.0486. Thus, in that case, AUD/NZD should decline through trend line support to 61.8% retracement at 1.0749 and below.

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