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Retail sales fell 0.1% in the September quarter, a smaller drop than we expected. Retail spending remains soft, but is likely to firm over the coming months.

• September quarter retail sales (volume of good sold): -0.1% (Prev: -1.2%)
  • Westpac f/c: -0.5%, Market: -0.5%
• September quarter nominal retail sales: -0.7% (Prev: -1.4%)

While not quite as weak as expected, September was another soft quarter for New Zealand’s retail sector.

Nominal retail spending fell 0.7% in the September quarter, with the volume of goods purchased down 0.1% (we had expected a sharper 0.5% fall in the volume of goods sold).

Spending in the September quarter was boosted by a rise in vehicle purchases, which can be lumpy on a quarter-to-quarter basis (for instance, this month’s rise followed a sharp drop last quarter).

However, looking under the surface, the softness in New Zealanders’ spending appetites remains clear. Spending in core (excl. vehicles and fuel) categories was down 0.8% over the past three months and is down 2.8% over the past year.

Looking at the longer-term trends in the retail sector, sales have been trending down over the past year as households have wound back their spending in response to increases in living costs and high interest rates. There has been particular softness in discretionary spending areas, like purchases of household furnishings and spending in bars and restaurants.

What’s the outlook for Christmas and beyond?

We expect that the September quarter will be the low point for retail sales. Tax cuts were rolled out in late July. In addition, the financial headwinds that have squeezed household spending power over the past year are now easing, with inflation dropping back and interest rates falling. It will take time for the full impact of those changes to pass through to households’ back pockets. However, confidence is on the rise.

Against that backdrop, we expect to see retail spending gradually pushing higher as we go into the holiday shopping season, with a more meaningful rise expected through mid-2025.

Implications for GDP growth

While firmer than expected, today’s figures were broadly in line with the continued softness in economic growth that we’re forecasting in the September quarter (we’re forecasting a 0.2% fall in GDP over the quarter). We’ll take a closer look at how our forecast for GDP growth is shaping up over the next couple of weeks as additional data on September quarter activity is released.

Key Highlights

• EUR/USD started another decline and traded below the 1.0500 support.
• A major bearish trend line is forming with resistance at 1.0485 on the 4-hour chart.
• Bitcoin rallied further and traded close to the $100,000 milestone level.
• GBP/USD dipped further and tested the 1.2500 support zone.

EUR/USD Technical Analysis

The Euro started yet another decline from the 1.0600 zone against the US Dollar. EUR/USD traded below the 1.0550 and 1.0520 levels to enter a bearish zone.

Looking at the 4-hour chart, the pair settled below the 1.0500 support, the 100 simple moving average (red, 4-hour), and the 200 simple moving average (green, 4-hour). It even tested the 1.0335 zone. A low was formed at 1.0333 and the pair is now consolidating losses.

On the upside, the pair could face resistance near the 1.0440 level. The first major resistance is near the 1.0485 level. There is also a bearish trend line forming with resistance at 1.0485 on the same chart.

A close above the 1.0485 level could set the tone for another increase. The next major resistance could be 1.0520, above which the price could climb higher toward the 1.0550 resistance. Any more gains might send EUR/USD toward 1.0600.

On the downside, immediate support sits near the 1.0350 level. The next key support sits near the 1.0335 level. Any more losses could send the pair toward the 1.0300 level.

Looking at Bitcoin, the price extended gains, traded to a new all-time high above $98,000 and might soon clear the $100,000 level.

Upcoming Economic Events:

• German IFO Business Climate Index for Nov 2024 – Forecast 86.0, versus 86.5 previous.
• German IFO Current Assessment Index for Nov 2024 - Forecast 85.5, versus 85.7 previous.
• German IFO Expectations Index for Nov 2024 – Forecast 87.3, versus 87.3 previous.

GBPUSD broke support zone
• Likely to fall to support level 1.2465

GBPUSD currency pair recently broke the support zone located between the support level 1.2620 (former monthly low from June) and the support trendline of the daily down channel from September.

The breakout of this support zone accelerated the active minor impulse wave 3 of the higher impulse wave (C) from the start of November.

Given the strongly bullish US dollar sentiment seen today, GBPUSD currency pair can be expected to fall further to the next support level 1.2465, former monthly low from May and the target for the completion of the active impulse 3.

• USDCHF broke resistance zone
• Likely to rise to resistance level 0.9000

USDCHF currency pair today broke the resistance zone located between the resistance level 0.8900 (which has been reversing the price from July) and the 61.8% Fibonacci correction of the downward impulse from April.

The breakout of this resistance zone coincided with the breakout of the daily up channel from September – which accelerated the active impulse wave (5).

USDCHF currency pair can be expected to rise further to the next round resistance level 0.9000.

EUR/USD's decline from 1.1213 continued last week and accelerated to as low as 1.0330. There is no sign of bottoming yet and initial bias stays on the downside this week. Sustained trading below 1.0404 key fibonacci level will carry larger bearish implication and target next level at 161.8% projection of 1.1213 to 1.0760 from 1.0936 at 1.0203. Nevertheless, strong rebound from current level, followed by break of 1.0609 resistance, will indicate short term bottoming.

In the bigger picture, immediate focus is now on 50% retracement of 0.9534 (2022 low) to 1.1274 at 1.0404. Strong rebound from this level will keep price actions from 1.1273 (2023 high) as a medium term consolidation pattern only. However, sustained break of 1.0404 will raise the chance that whole up trend from 0.9534 has reversed. That would pave the way to 61.8% retracement at 1.0199 first. Firm break there will target 0.9534 low again.

In the long term picture, down trend from 1.6039 remains in force with EUR/USD staying well inside falling channel, and upside of rebound capped by 55 M EMA (now at 1.0991). Consolidation from 0.9534 could extend further and another rising leg might be seem. But as long as 1.1274 resistance holds. downside breakout would be mildly in favor.

USD//JPY stayed in consolidation below 156.74 last week. and initial bias stays neutral this week first. On the downside, break of 153.27 will bring deeper correction to 38.2% retracement of 139.57 to 156.74 at 150.18. Meanwhile, on the upside, firm break of 156.74 will resume the rally from 139.57 towards 161.95 high.

In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low). The range of medium term consolidation should be set between 38.2% retracement of 102.58 to 161.94 at 139.26 and 161.94. Nevertheless, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

In the long term picture, it's still early to conclude that up trend from 75.56 (2011 low) has completed. However, a medium term corrective phase should have commenced, with risk of deep correction towards 55 M EMA (now at 134.54).

GBP/USD's fall from 1.3433 continued last week and there is no sign of bottoming yet. Initial bias stays on the downside this week for 100% projection of 1.3433 to 1.2842 to 1.3047 at 1.2456. Decisive break there will extend the fall from 1.3433 to 1.2298 cluster support zone. For now, risk will stay on the downside as long as 1.2713 resistance holds, in case of recovery.

In the bigger picture, a medium term top should be in place at 1.3433, and price actions from there are correcting whole up trend from 1.0351 (2022 low). Deeper decline is now expected as long as 55 D EMA (now at 1.2918) holds, to 38.2% retracement of 1.0351 to 1.3433 at 1.2256, which is close to 1.2298 structural support. Strong support should be seen there to bring rebound.

In the long term picture, as long as 1.2298 support holds, rise from 1.0351 long term bottom is expected to continue. But in any case, outlook is neutral at best as long as 1.4248 structural resistance holds.

USD/CHF's rally from 0.8374 continued last week despite interim consolidations. Initial bias stays on the upside this week for further rise to 0.9223 key resistance. For now, outlook will remain bullish as long as 0.8800 support holds, in case of retreat.

In the bigger picture, price actions from 0.8332 (2023 low) are currently seen as a medium term corrective pattern, with rise from 0.8374 as the third leg. Overall outlook will continue to stay bearish as long as 0.9223 resistance holds. Break of 0.8332 low is in favor at a later stage when the consolidation completes.

In the long term picture, price action from 0.7065 (2011 low ) are seen as a corrective pattern to the multi-decade down trend from 1.8305 (2000 high). Fall from 1.0342 (2016 high) is seen as the second leg. Rejection by 55 M EMA suggest that this fall is in progress. Break of 61.8% retracement of 0.7065 to 1.0342 at 0.8317 will pave the way back to 0.7065.

AUD/USD stayed in consolidation above 0.6440 last week and outlook is unchanged. Initial bias remains neutral this week for some more consolidations. But further decline is expected as long as 0.6687 resistance holds. On the downside, decisive break of 61.8% projection of 0.6941 to 0.6511 from 0.6687 at 0.6421 will resume the fall from 0.6941 to 100% projection at 0.6257 next.

In the bigger picture, rise from 0.6269 (2023 low) should have completed with three waves up to 0.6941. Corrective pattern from 0.6169 (2022 low) is now extending with another falling leg. Deeper decline would be seen back to 0.6269 as sideway trading extends.

In the long term picture, the down trend from 1.1079 (2011 high) should have completed at 0.5506 (2020 low) already. It's unsure yet whether price actions from 0.5506 are developing into a corrective pattern, or trend reversal. But in either case, fall from 0.8006 is seen as the second leg of the pattern. Firm break of 0.7156 resistance will argue that the third leg has already started towards 0.8006.