GBP/NZD Rate: Battle between Bears and Bulls

Will the GBP/NZD rate break down once move and lower, or will recover and resume its prematurely aborted uptrend?

After making highs of 1.7946 at the start of the week, the exchange rate fell to lowsof 1.7660 in the mid-week session and was seen coming to rest on the level of the upper borderline of the large triangle which it broke out of last week.

For confirmation of a renewal of the uptrend we would want to see a break above the 1.7946 highs, leading to a continuation up to a potential target at the 50-week moving average (MA) at 1.8327.

However, a break back below the 1.7500 level would probably indicate the start of a more protracted move down, with a target at 1.7415 and the 50-day moving average, at least initially.

Overall, it’s difficult to determine from technical studies alone a bias for either direction and ultimately time will tell how the market resolve’s itself.

Weekly chart showing the possible evolution of the triangle pattern.

Data Ahead for the New Zealand Dollar

The main release in the coming week for the Kiwi is the ANZ Business Confidence Survey on Thursday, March 30 at 01.00 GMT.

The survey has an inflation expectations subsection, which will be closely scrutinized for inflation pressures.

TD Securities say they will be watching for the trend to rise to 1.7% in February, which could potentially herald a rate increase from the RBNZ.

“We and the RBNZ will be watching for the trend in inflation expectations, rising to 1.7% in the February report. Rising inflation expectations are necessary and sufficient the RBNZ to lift rates.”

Pound Sterling this Week

Now that Theresa May has triggered article 50 the official Brexit process is underway.

The Pound reacted by first weakening, in the early morning and then strengthening after markets were given hope by the conciliatory and diplomatic message from Prime Minister May.

In Brussels, the tone was equally conciliatory, with the EU’s Donald Tusk saying “We miss you already,” however, the next significant release for the Pound will be the official response of the European Commission to the triggering of Article 50 which will probably come in the next few days.

Formal negotiations are not expected to begin until the Summer.

Although GDP data is out at 08.30 GMT on Friday, March 31, it is just a third and final revision and therefore highly unlikely to surprise.

Mortgage Approvals, also out on Friday are not forecast to move much and thus seem unlikely to have much impact on the market.