By Danica Hampton

There's a campfire classic playing in my head as we start the day, still trading in and respecting the recent range and levels of support and resistance. The NZD challenged the US 62cent level in overnight trade, but is back marginally above the US 63 cent level as we start our day.

Our analysts aren't getting excited by yesterday's retail sales figures. They were warmed only by the extreme cold snap of May, with spending on clothing featuring in the detail. For the true test of the health of retailing, then, they'd prefer to keep closer tabs on sellers, rather than buyers.

Buyers would seem to be enjoying substantial bargains - perhaps part explanation for why consumer confidence is holding its head above water, for the meantime. But sellers would appear to be wearing a lot of pain, still. This is ultimately not great news for the economy, and the sustainability of any recovery. The recent months look especially disappointing given the 1 April tax cuts, and increasing population growth, courtesy of rising net immigration.

Yesterday"˜s farmer confidence survey fell once again, and while the dairy sector remains in the doldrums, sheep and beef farmers confidence plummeted to record 44% with a pessimistic outlook. Not surprisingly the level of the currency and the waning of the forecast "˜09/10 dairy payout are noted in returns.

Attention on items from the weekend media had seen the week start with Asian equities under pressure, red ink there and in the S&P futures trading sending currencies lower through our day and the London morning. Mainstream media highlighted commentary from the IMF that the UK was the only leading economy that would be unable to afford any form of rescue package in 2010 if required while opinion pieces highlighted the risks of a bond crisis at the ECB and disintegration of the EMU. From the other side of the Atlantic, Geithner and Summers both warned that the global recovery faces significant risks, with Summers adding he doesn't think the worst is over. All this and some further unwinding of Yen cross holdings from Japanese accounts weighed on currencies. However, Far East accounts and in the case of the NZD, some of our own onshore clients, were again buyers into the lower levels.

The turn in sentiment and the subsequent rally across currency markets in the New York session seems to owe it's origin to equity markets. Across Europe and the USA the indices are generally 1.5-3.0% higher, shrugging aside the media and commentary gloom of earlier. Financial shares are leading the rally after some banking investments were given the Midas touch by notable analysts amidst this week's earnings report season.

This weeks abbreviated economic calendar is quiet today, though from Australia we do get the NAB Business Confidence & Conditions surveys.

As we start the new day, we would highlight immediate resistance at the 0.6325/0.6350 level "“ beyond that 0.6400/0.6425. As we saw last night support exists at 0.6200/0.6225, with periodic demand from both onshore and Far East accounts. Further weakness in the expectations for the global outlook would likely take us lower, towards the 0.6125/0.6150 window that until late May had contained the NZD advance off February lows.

The majors

The week has started with liquidity thin and volumes low across currency markets, and for the most part familiar levels and ranges persist.

Aside from the continuing earnings reports, there is a full calendar of data releases from the UK and the USA to focus attention. The UK reports a mix of house price data as well as inflation readings for June. There's also retail sales numbers from the UK and the US, while PPI and Business Inventory updates are also forthcoming from the US. The German's have their July update on ZEW (Economic Sentiment) to release tonight.

* Danica Hampton is BNZ's Currency Strategist. All of the research produced by the BNZ Capital team of economists is available here.