British Pound Likely to Make Move Against New Zealand Dollar
- Longer term uptrend
- Brexit moving forward
- Large bullish pennant
The British pound has been grinding back and forth against the New Zealand dollar over the last several sessions. This resulted in forming a bit of a bullish pennant in a sign that the market is very likely to continue going higher. With this in mind, there are several things to pay attention to the market. Not the least of which of course is Brexit as it moves forward and looks to have avoided being a “no-deal Brexit” for October 31.
While the worst-case scenario seems to have been either taken off the table or at least put to the back burner, this has lifted the British pound against most currencies. The New Zealand dollar is no different.
Bullish pennant and technical analysis
The bullish pennant is without a doubt the most important thing to pay attention to on the chart from a technical analysis standpoint. However, it’s not the only thing. The market currently is dancing around the 2.01 level. This is a significant figure. Beyond that, the market is also showing signs of support at the 38.2% Fibonacci retracement level. That is a very common level for traders to re-enter a market, especially when it is in an impulsive mood such as the GBP/NZD pair.
Also, worth noting is that we have recently seen the so-called “golden cross”. This is when the 50-day EMA crosses above the 200-day EMA. This is a longer-term “buy-and-hold” signal. Although admittedly for larger players. To the downside, the 2.00 NZD level will, of course, attract a lot of attention.
The projected target would be for an eight-handle gain. This would translate to roughly 2.10 NZD, a nice large figure, which tends to attract a lot of attention. With that in mind, this could be a nice set up on a break above the downtrend line and roughly 2.02 NZD above. With all that being said, the downside scenario should be explored as well.
If the market was the breakdown, it would need to slice through the 61.8% Fibonacci retracement level at the end 1.98 NZD handle. If it did, then the market would more than likely wipe out the entire move and go back to the 100% Fibonacci retracement level which is closer to the 1.93 level. All things being equal though unless there is some type of extraordinarily negative news involving the Brexit, this is a pair that should continue to go higher. The other wildcard, of course, is the US/China trade situation but that doesn’t seem to be going anywhere anytime soon.