The GBP to NZD conversion looks poised for further gains having recently broken above a key trend-line.
Trading at 1.7464 at the time of writing, GBP/NZD has breached a major trend-line and is now looking decidedly bullish on price charts.
The rally since the election of Donald Trump is showing technical signs indicating a strong possibility of a longer-term reversal of the trend.
The pair broke above the trend-line at the end of last week and has since been pulling-back into support, the strong short-term uptrend looks dominant and likely to resume soon, however.
The MACD momentum indicator is backing up the bullish tenor of the charts by moving above the zero-line, indicating the possibility of more upside on the horizon.
The blue dots labeled P on the chart indicate Japanese candlestick formations.
Note how three occurred in quick succession above the strong green up bars, just before the trend-line break.
The three bullish Japanese candlestick patterns are a Bullish Engulfing, a Three Outside Up and a Three White Soldiers pattern.
When Japanese candlestick patterns occur within a few bars of each other they tend to reinforce each other’s signals, increasing the probability of a bullish follow-on.
This combined with the trend-line break, and the break of the 50-day Moving Average, suggests more upside for GBP/NZD.
The 1.7800 high caps gains at the R1 monthly pivot which is likely to act as a ceiling to further price gains.
Monthly pivots are levels watched by traders where prices often pause or rebound.
Traders often use them as areas in which to fade the trend, placing orders which are counter to the dominant directional bias in expectation that the pivot will produce a rebound.
A clear break above 1.7855 would probably confirm a break above R1 and a continuation up to the next target at 1.7900.
Expectations for a stronger GBP will be welcomed by those with impending GBP into NZD payments as they have seen their buying power steadily decline through 2016.
At present, a 1.7644 GBP/NZD offers a range of retail transfer rates lying between 1.7026 and 1.7485 depending on how competitive the provider is.
The New Zealand Dollar in 2017 - Downside Risks Grow
Turning to the longer-term, fundamental outlook for the New Zealand Dollar, we hear 2017 could be a struggle for what is considered by some to be the most overvalued currency in the world.
Analysts at Barclays have released their latest exchange rate forecasts for 2017 and they argue the outlook for the NZD under the potential anti-globalization, anti-establishment political shift in Developed Markets and steepening yield curves is mixed.
Analysts note there are positives in the form of beneficial terms of trade and New Zealand's immigration and building boom which are helping to stave off the effect of ‘Dutch disease’ as the economy continues to transition from resource dependency.
However, sources of depreciation remain.
Against a backdrop of still-significant overvaluation, missingflation is a growing problem and Barclays expect a resumption of slowing in Chinese growth with downside risks.
"The RBNZ continues to express its discontent with the high level of the NZD and its November Monetary Policy press conference did not rule out FX intervention or another rate cut. Amid these offsetting forces, we have flattened the path of NZDUSD depreciation," say Barclays.
Analysts at Barclays' fellow high-street lender Lloyds Bank have also this week updated clients with their expectations for the New Zealand Dollar in 2017.
"Despite the strong domestic outlook, the currency faces a number of downside risks," say Lloyds in a briefing to commercial clients.
It is believed that comments from RBNZ officials - highlighting their concerns around the strength of NZD and open mindedness on FX intervention - act as a warning to the market.
"Given the prevailing conditions, we expect a moderate decline in NZD/USD towards 0.70by end-2016," say Lloyds.