GBP/NZD Strengthens to Key Resistance Level
GBP/NZD is higher on Wednesday, extending the previous day’s gains and lifting the rate towards a significant technical resistance level.
The British pound to New Zealand dollar exchange rate has increased by 2.3% in the last two weeks, from 1.8804 to the current level of 1.9160.
The rally comes as the British pound’s relative outperformance against the US dollar helps it gain ground against the Kiwi. The New Zealand dollar lost 2.3% against the greenback on Tuesday following the higher-than-expected US Consumer Price Index (CPI) data.
The CPI print, which showed inflation rose more than forecast, saw the US dollar make significant gains against global peers. USD’s constructive price action, follows increasing odds of a super-sized rate hike at the next Federal Open Market Committee (FOMC) meeting. Although the market was pricing a 75 basis-point hike at the next FOMC, yesterday’s hot CPI number has some analysts calling for the Fed to go even further. As such, we may even see a full percentage hike when the Fed governors convene next week.
The dollar’s outlook is relevant to the GBP/NZD cross as the pound appears to be weathering the storm better than NZD. Although, the pound lost 1.60% as risk sentiment soured on Tuesday, it held-up better than the Kiwi, prompting GBP/NZD gains. As a result, sterling is close to breaking out on the upside. However, it must first overcome some considerable obstacles.
British Pound to NZ Dollar Forecast
The daily chart shows the pound is pulling clear from the band of long-term support between 1.8700 and 1.8900. Subsequently, GBP has crossed above the 50-Day Moving Average (DMA) at 1.9160 (green line), and now working towards trend resistance at 1.9280. Notably, the 100-DMA at the same level reinforces the trend’s significance.
The confluent resistance should cap the immediate gains. However, a close above 1.9280 will be viewed as constructive, likely leading to an extension towards the 200-DMA at 1.9465 (red). The outlook remains positive as long as GBP/NZD is above the 50-DMA. With that in mind, a close below 1.9160 shifts our view to bearish.
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