Pound-to-New-Zealand-Dollar Rate Forms Bullish Flag Pattern on the Charts

- GBP/NZD forms bullish flag within existing triangle formation
- Suggests short-term rise to upper boundary may be in cards.
- Ardern's foreign property buyers ban goes through parliament.

© Rafael Ben-Ari, Adobe Stock

The Pound may rise against the New Zealand Dollar over the short-term because charts are showing the formation of a bullish set-up.

This bullish signal comes even after the Kiwi parliament voted to ban foreigners from acquiring existing residential properties in New Zealand - a heavily criticised move that may deter investment from New Zealand.

More broadly GBP/NZD has been moving sideways within the two parallel lines of a triangle ever since the December 2017 highs.

Above: GBP/NZD at daily intervals.

Recently the pair rose up strongly from the lower boundary line at 1.9070 to highs of 1.9437 - all in a single day, the 9th of August - since then it has traded sideways in the 1.93s and 1.94s.

Above: GBP/NZD shown at daily intervals.

The steep rise followed by the multi-day sideways consolidation has formed a bullish flag pattern which augurs positive for the exchange rate.

Flags normally move the same distance higher as the length of the steep rally (the 'pole) prior to the formation of the sideways consolidation. This suggests the exchange rate will rally to the upper boundary of the triangle at 1.9600 once it breaks out to the upside.

A bullish breakout would be signalled by a move above the 1.9456 flag highs. A breakout from the triangle would require a break above 2.000, with an upside target then at 2.0400.

The triangle has finished forming the five waves (a-e) for meeting the minimum requirement of completion, so it is now probably close to breaking out.

In some rare occasions the exchange rate can also carry on sideways and form 9 component waves. Weather he price breaks higher or lower out of the triangle is not yet clear. 

A break lower would have to move below 1.8900 to reach a target at 1.8200.

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