GBP/NZD – Aiming for 1.77

GBP/NZD – Aiming for 1.77

On a fundamental and technical basis we believe that GBP/NZD is headed for further losses. Fundamentally sterling is weighed down by Brexit fears -- over the last two weeks, there’s been a lot of talk that Article 50 will be invoked early next year and both sides appear unwillingly to concede on key terms. After 2 months of calm, this reminded everyone of how messy Brexit will be. In the coming weeks we expect GBP to remain under pressure as more headlines like these stifle rallies. NZD could also remain under pressure but is likely to outperform GBP. While the RBNZ made it clear this week that “further policy easing will be required,” they don’t meet again until November so between now and then, investors will still be attracted by New Zealand’s 2% carry. The sell-off in NZD/USD has also taken the pair to support at the 50-day SMA whereas the next key level for GBP/USD is not until the August low of 1.2866.

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Technically, we would like to highlight the 4 hour chart of GBP/NZD. Having hit a low near 1.76 on Tuesday, the currency pair has staged a strong recovery. However the presence of multiple moving averages above (50, 100 and 200-period) along with lower highs and lowers signal the potential of a deeper correction that should take the currency pair to at least 1.78 and possibly even 1.77. The daily chart also shows the bounce fading with significant resistance at 1.80.

Chart Of The Day

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