GBP/NZD to 1.84?

GBP/NZD to 1.84?

Chart Of The Day

GBP/NZD to 1.84?

GBP/NZD fell hard today – the move wasn’t much of a surprise as sterling was the day’s worst performer and the New Zealand dollar was the best. Cable is weaker because it is once again becoming clear how difficult Brexit negotiations will be – there’s still a lot of contention surrounding the Brexit bill with the UK refusing to pay a balance that could top $100 billion. The two sides are clearly preparing for tough negotiations, which begin formally June 19th. Cable has seen a very strong rally in anticipation of a large Tory win in the UK elections, but PM May’s lead has declined considerably and if she does not win an overwhelming majority her position at the bargaining table may be weakened.” In contrast, NZD is being supported by the recent improvements in data

Technically, GBP/NZD has broken below the 20-day SMA and if it drops below the May low of 1.8563, there’s a bit of support at 1.8515, the 23.6% Fib retracement of the 2015 to 2016 sell-off but ultimately the next stop should be 1.84.

GBP/AUD – 1.84 is Key

GBP/AUD – 1.84 is Key

Chart Of The Day

Fundamentals

Last week’s hawkish BoE Quarterly Inflation report triggered a massive breakout in GBP/AUD but the currency pair is vulnerable to a sharp reversal over the next 24 hours. Starting with the Australian dollar, tonight the Reserve Bank of Australia will be releasing the minutes from their last monetary policy meeting. Since the RBA dropped its bias to ease, the minutes will most likely contain a more optimistic tone that could accelerate the gains for AUD. In contrast, the Bank of England expressed their concerns about low inflation in their Quarterly report and combined with a decline in shop prices, we have every reason to believe that consumer prices declined in the month of January. The combination of less dovish RBA minutes and weaker UK data could drive GBP/AUD sharply lower over the next 24 hours and a break of 1.84 is key.

Technicals

1.84 is an important technical support level for GBP/AUD because it was last week’s breakout point. In early February, the currency pair also tested but failed to break above 1.84 a few times, proving the significance of this level. If GBP/AUD drops below 1.84, there is no major support until 1.82. If it holds above 1.84, the next resistance it needs to clear is 1.8590/1.86 the 23.6% Fibonacci retracement of the October to January rally.