GBP/NZD Close to Touching Major Trendline

The Pound to New Zealand Dollar has been moving up all through 2017 but it is closing in on a significant resistance level now supplied by the trendline drawn from the August 2015 highs.

This is a major trendline and if the pair can break above it, it will change the outlook for the pair substantially, making it look much more likely a new longer-term bull trend is beginning.

Resistance will be tough, however, as bears will flock to defend the trendline and the exchange rate will almost certainly meet significant selling pressure at 1.8100 when it touches it, if not before.

There is a possibility that instead of breaking above the trendline the pair will rotate and start falling, however, given it is in a strong uptrend already and has risen above both the 50 and 200-day moving averages, we see a strong chance of a continuation.

Momentum, as measured by MACD (circled), is not particularly strong, however, so the current move higher is probably not well supported.

In addition, analysts like Jason Wong at BNZ see the New Zealand Dollar as undervalued and due a rebound.

Nevertheless, if the exchange rate can manage to break and hold above 1.8150, a breach will be confirmed and lead to a probable continuation up to a target at 1.8400 - calculated from extrapolating the move immediately prior to the trendline break above it.

It is worth adding too that Sterling is also undervalued according to many models, due mostly to the premium from Brexit political uncertainty.