GBP/NZD: Forecast, News and Events in the Coming Week
The Pound to New Zealand Dollar (Kiwi) is in a lengthy sideways range which began in June when the exchange rate bottomed at the 1.7300 lows.
The range gives no indication of future direction but normally there is a bias in the direction that the exchange rate was trending in before the range developed, which in this case was down.
A break below the 1.7300 lows, therefore, indicated by a move below 1.7300 would probably confirm an extension lower, and a breakout from the range, to a minimum target at 1.7000.
A break above the range highs at 1.7985, signalled by a move above 1.8000, would probably lead to a move up towards an initial target at 1.8400.
The MACD indicator is showing bullish bias, supporting a potential upside break eventually.
News and Events for the New Zealand Dollar
The main release for the Kiwi in the week ahead is trade data, including the Trade Balance, Imports and Exports, all out at 23.45 on Wednesday, August 23.
The trade balance is forecast to show a deficit of -200m on a monthly basis in July, which compares to an over 200m surplus previously.
The trade balance compared to a year ago, is forecast to narrow to -3.51bn in July from -3.66bn in June.
July exports are forecast to fall to 4.4bn from 4.7bn and Imports to rise to 4.60bn from 4.46bn in June.
News and Events for the Pound
The week starts off with Public Sector Net Borrowing in July, at 9.30 BST on Monday, which is forecast to show the British government borrowing 0.5bn more than it did in July 2016 when it borrowed 6.28bn less.
The Consortium of British Industry (CBI) Industrial Trends Survey for August is out at 11.00 on Tuesday, August 22, with forecasts of the ‘balance’ – of “yes” to “no” responses – expected to rise to 10, from 8 in the previous month.
Thursday is the main day for Sterling in the week ahead from a data perspective, and the second estimate for GDP in the second quarter, is probably the main release.
Q2 GDP rose by 1.7% according to the first estimate, and the second estimate is expected to show no-change from this; the Q1 estimate showed growth of 2.0%.
Mortgage Approvals are expected to show 40.2 thousand more approvals in July, according to data from the British Banking Association (BBA) out at 11.00 on Thursday. Some forecasters have stated they will rise to 40.9.
Mortgage approvals have formed a compelling triangle-shaped pattern when seen charted over recent years (see below).
According to research, triangles have a minimum of five component waves, and this pattern has formed fives waves already, labelled a-e, and as such could be complete.
The next move would be expected to be a breakout either higher or lower, however, what is highly probable is a period of high volatility in the not too distance future.
As we noted last month when making the same analysis of mortgage approvals, a reading of above 47,500 would indicate an upside breakout to a target of 55k whilst a reading below 37k would lead to a breakdown to a target at 30k.
Finally, Business Investment is a major release for the Pound, also out on Thursday, at 9.30 BST.
Markets will be following the release closely as Investment has been unexpectedly strong since the referendum when it was one of the things which was expected to be hit hardest, given companies need certainty before making investment commitments.
If Investment continues to remain robust that may well help the Pound.
Finally, towards the end of the week the main event for financial markets will be the Jackson Hole symposium in the US, where central bankers will be meeting to discuss monetary policies and the global economy, and where Bank of England governor Carney, may well contribute to the flow of commentary.
