GBPNZD has been trending lower on its longer-term time frames and zooming in to the latest move shows a possible pullback entry. Price has been moving below a descending trend line and a test of the resistance might take place soon.
At the moment, GBPNZD is stalling around the 38.2% Fib but a higher retracement to the 61.8% level might still be possible. Stochastic and RSI are both pointing higher, indicating that buyers are still in control and that further gains might be seen.
However, the 100 SMA is below the longer-term 200 SMA, indicating that the path of least resistance is to the downside. In addition, these moving averages are close to the trend line, which might hold as dynamic resistance levels.
Event risks for this setup include the release of PMI readings from the manufacturing, construction, and services sectors in the UK. Stronger than expected results could overshadow Brexit fears for the time being, allowing the pound to regain a lot of lost ground. On the other hand, bleak readings could underscore the shaky position that the UK is already in.
As for the Kiwi, data released earlier came in mostly weak, with the ANZ business confidence index sliding from 23.0 to 7.1 and building consents dropping by 8.9%. Data from its neighbor Australia hasn’t been too upbeat either, as the MI inflation gauge showed a 0.2% decline while company operating profits posted a sharp 2.8% drop.
Up ahead, the Chinese PMI release could set the tone for risk sentiment, as another sharp drop could weigh heavily on commodity currencies while a strong gain could spur risk-taking in the financial markets. The RBA statement could also have a significant impact on Kiwi action, as well as the GDT auction later on in the week.
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