The GBP/NZD exchange rate continues to resist downside pressures with a key support level continuing to keep alive a glimmer of hope for a more substantial recovery.
GBP/NZD is attempting to break higher but has so far failed to clear the technical resistance posed by a down-sloping trendline that lies overhead.
Although the long exhaustion bar which formed on the day of the flash crash in early October, circled below, is a bullish sign its significance has diminished with the passing of time.
Nevertheless, it continues to be a factor advocating for a bullish bias.
We want to see GBP/NZD break cleanly above the trendline to provide a clearer sign of more upside, and this would ideally require a move above the 1.7189 highs to confirm, generating an upside target from there to 1.7300:
A continuation of the established downtrend is also a possibility with a move below the 1.6800 lows providing the confirmation for more downside to an initial rather modest target of 1.6700.
At the time of writing GBP/NZD is seen trading at 1.6935 - above the key support level at 1.69-1.70 which the pair seemingly unwilling to move below here on a sustained basis.
We would look for the level to hold in the near-term but one gets a sense that this market has to move - will it be in favour of Sterling in the form of a move above the downard trendline or will it favour the New Zealand Dollar in the form of a break below that rock-hard support?
One catalyst for a move could be the Reserve Bank of New Zealand’s (RBNZ) interest rate decision on Thursday November 10.
This could be a game-changer, as a cut in rates is still the expected outcome, and this could provide the impetus for a more forceful break higher.
However, should the RBNZ shy from cutting rates and catch the market positioned incorrectly there could well be a move lower in GBP/NZD.
New Zealand Dollar Catches the Clinton Bounce
The NZD was one of the outperformers at the start of the new week amidst a general lift in sentiment in global markets.
We have seen the NZ Dollar tends to perform better when other high-yielding financial products - such as stocks - out-perform.
Global stock markets are in a buoyant mood at the start of the new week as traders rushed to price in an Hillary Clinton victory in Tuesday's election.
"If last week saw the likes of the indices and Dollar decimated as a result of another FBI email investigation, it comes as no surprise that today’s announcement has seen a substantial amount of last week’s losses reversed. The big question is whether this announcement will have a material effect upon the outcome of the US election, which is clearly perceived to be the case according to today’s market reaction," says Joshua Mahony at IG in London.
With hours to go before Americans vote, Democrat Hillary Clinton has about a 90% chance of defeating Republican Donald Trump in the race for the White House, according to the final Reuters/Ipsos States of the Nation project.
Her chances are roughly similar to last week's odds, and any upset by Trump on Tuesday depends on an unlikely combination of turnouts of white, black and Hispanic voters in six or seven states, according to the survey released on Monday.
Markets appear to have priced a Clinton victory so we see little further benefit to the NZ Dollar stemming from a Clinton win which leaves a potential big risk to the downside on a Trump win.