The short-term trend remains bullish and therefore likely to continue in the absence of any majorly bearish signs.
A break above the top of the range at 1.8003 would confirm a move up to the next resistance level at 1.8100.
A move above 1.8150 would then signal a continuation to 1.8300, a target calculated by extrapolating the range by a Fibonacci ratio of 61.8% higher.
Fibonacci ratios were developed by an Italian Mathematician called Leonardo Fibonacci in the 13th century who sought to find a way of explaining interrelationships in natural phenomena.
Latter it was also shown to work in financial markets and the 61.8% ratio, which is known as the Golden ratio is the most important.
The MACD is the only negative on the chart as it is looking weak compared to price action, but alone that is not enough of a sign to signal a sell-off.
UK GDP Data Boosts Sterling
The Pound rebounded pulling GBP/NZD lower on the morning of Friday, December 23 after UK Q3 GDP was revised up to 0.6% quarter-on-quarter from 0.5% previously.
The year-on-year result was revised down to 2.2% from 2.3% previously, but this did not prevent Sterling from appreciating in most pairs due to the higher quarterly result.
The data reinforces the UK economy's remarkable resilience in the face of the uncertainties posed by Brexit.
Economic Outlook Balanced
The fundamental outlook for NZD remains fairly balanced.
Exports have fallen and the overheating housing market has cooled.
It has not enjoyed the same boost as the Aussie from rising Iron Ore prices as New Zealand's exports mainly comprise soft commodities.
But Dairy prices have risen steadily, though not as much as metals, and this has boosted the Kiwi.
The main downside for NZD like all high yielders is the threat of outflows to the USD.
Expectations of higher interest rates offered in the US – especially after Fed members indicated they would be raising interest rates three times in 2017 – have drawn investors back to the USD.
But yields haven’t just risen in the US – they have risen all over the globe, the United Kingdom included, and although less stark, the change in flow dynamics may well also favour GBP against the NZD or at least support it.
There are not expectations of interest rate changes in New Zealand in the immediate future.
CIBC's Royce Mendes suggests the Reserve Bank of New Zealand (RBNZ) however, may use 'verbal intervention' to further weaken the New Zealand Dollar.
“With inflation expectations remaining subdued, look for the central bank to try a dose of verbal intervention to push the currency weaker.
“All told, despite having already taken a tumble, the kiwi is vulnerable to at least a marginal further depreciation in the first quarter of next year,” concludes CIBC’s Mendes.