Pound at Range Highs Against New Zealand Dollar; Upside Bias Intact
The Pound to New Zealand Dollar exchange rate (GBP/NZD) has taken another step higher after the outgoing governor of the Reserve Bank of New Zealand (RBNZ) told an audience the New Zealand Dollar was still too strong to be of optimum support to the economy.
His comments continued to support the RBNZ's neutral stance on interest rates which are currently at a record low of 1.5% and unlikely to shift - a stance encapsulated by Wheeler's catchphrase rates will remain "lower for longer".
The outgoing governor's comments are covered in more detail by Pound Sterling Live's James Skinner here, this article is more concerned with the technical side of the GBP/NZD story.
Wheeler's comments are reflected in the latest punch higher by the exchange rate, as shown in the four-hourly chart below.
This seems to suggest the pair is in a fairly well-established uptrend, however, although it is true that on the four hour timescale the succession of peaks and troughs are now higher, if we pan out a bit and look at the daily chart, we see the exchange rate is in a much more chaotic sideways range.
This range started at the June lows of 1.7331 and peaked at the July 1.7985 highs.
The pair is currently ascending within the range and is close to touching the highs.
We expect it to continue and reach 1.8000, where it will probably stall and consolidate, however, if it breaks out higher - signalled by a move above 1.8050 - a strong move higher, more or less equal in height to the range itself could develop, propelling the exchange rate up to the heady heights of 1.8400, if not even higher.
Likewise, a breakout lower, signaled by a move below 1.7500, would probably lead to an extension of equal length to the height of the triangle down, and a probable baseline target of 1.7000.
The fundamentals seem to support a breakout higher rather than lower as political risks ahead of the September 23 election remain heavily skewed to a weaker Kiwi, and therefore a higher GBP/NZD rate.
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