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What’s Expected

If you love scalping, are a fan of the comdolls, and are considering trading the news, the New Zealand retail sales report could give you a good chance to gain some pips this week.

It’s a pretty big deal as it only comes out quarterly and gives the market a nice picture of the country’s consumer spending.’s reliable forex calendar reveals that it is scheduled to come out tomorrow, at 6:45 am GMT (or 6:45pm EDT), so let’s take a look what this report is all about.

For the Q2 2013 retail sales report, the market anticipates a 1.4% gain for the headline figure and a 1.3% jump in the core version. In Q1 2013, headline retail sales only rose 0.5% while core sales increased 0.6%.

What Data is Telling Us

Data for a strong retail sales

Data for a weak retail sales

A quick glance at the numbers above might lead you to believe that there are more reasons for the retail sales report to show a weak figure. After all, tier 1 economic reports such as the CPI, labor report, and the GDP all recently came in below expectations.

But keep in mind that all of these reports are lagging indicators. The forward-looking leading indicators such as business confidence and consumer sentiment surveys have printed significant improvements. What’s more is that they’re also showing strong momentum and a trend seems to be developing, as we have seen these reports post consistent improvements over the past few months.

The ANZ Business Confidence survey rose from 32.3 in April to 52.8 in July. The NZIER Business Confidence survey started the year at 20 but has climbed to 32. Meanwhile, the Westpac consumer sentiment index is currently at a level that hasn’t been touched since September 2012.

How to Trade the Report

The way I see it, with forecasts predicting a second straight increase in retail sales and leading indicators pointing at potential strength, the outlook favors a bullish move for the Kiwi. A strong showing from the retail sector would pave the way for a long Kiwi trade as it would give the central bank more leeway to raise its benchmark interest rate off its record low.

If the headline retail sales report prints above the expected 1.4% reading, it could clear the road for an eventual break of the .8100 resistance level. On the other hand, a lower-than-expected reading will likely keep NZD/USD trading within its horizontal range.