Good afternoon team,
This week we have seen commodity related currencies struggle to make up further ground. Commodities such as copper, gold, silver and oil have also had a lack lustre week. It appears as though the recovery of the commodity related currencies is running out of steam. This may also be due to the DXY approaching some key support levels, meaning we may see some strength push back into the USD at some point.
On the NZ front, we are expecting a dovish RBNZ leading into the August meeting.
Figures from NZ showed consumer prices fell 0.5% in the June quarter, the first drop in four years with annual inflation dropping from 2.5% to 1.5%. CPI is a measure of inflation/ the cost of living. As a general rule of thumb higher inflation supports higher interest rates and vice versa, low inflation suggests central banks may need to cut interest rates which will devalue to currency. The RBNZ has indicated at some point they will look at negative rates. With deflation taking place we could see the kiwi weaken from its highs.
GBPNZD – Top Down Technical Analysis
Last weeks candle was an inside bar which has resulted in reversals previously when found at the bottom of a trend.
GBPNZD – Daily Charts
There has been a bullish divergence on the RSI suggesting we may see a reversal on the pair.
GBPNZD – 4 Hour Charts
There has been a falling wedge breakout, followed by a potential inverted head and shoulders formation. The market is currently trading on the right shoulder line. If this plays out we could see a break above the neck line moving towards 1.9330.
Trade setup: BUY GBPNZD – Market execution, current price 1.9144, stop loss 1.9044, take profit 1.9330.
Stop loss: 100pips
Take profit: 186 pips
Although our stop loss is 100 pips away, if the market breaks the shoulder line at 1.9120 we may close the trade early.