Last week, the US dollar strengthened strongly against the pound and about the same weakened against the New Zealand dollar (+ 1.8% and -1.9%, respectively).
The reason for this behavior of the dollar against the pound was associated with a massive decline in the pound in the foreign exchange market after the weak macro data on the UK came out and it became known that the gap between the Labor Party and the Conservative parties had significantly reduced before the elections to the country's parliament.
New Zealand's same currency strengthened after last week the New Zealand government has submitted a budget for 2017-2018. According to this document, a budget surplus is expected, strong GDP growth and tax cuts. The budget indicates that the Reserve Bank of New Zealand may soon begin to consider raising the interest rate in the country, which is currently one of the highest among the advanced economies (1.75%). The New Zealand dollar became the leader of growth last week.
Proceeding from the above, the fall of the pound against the New Zealand dollar is especially strong.
Today in the UK is a bank holiday. Important economic news in the calendar is also not contained.
Arguments for the growth of the NZD / USD pair:
• The GBP / NZD pair has reached an important support level of 1.8190 (200-period moving average on the daily chart). Even if there is a breakdown of this level and further reduction of the NZD / USD pair, before the further decline, a rebound from the level of support and corrective growth is possible.
• The GBP/NZD has been in an uptrend since the beginning of the year.
• After a strong multidirectional movement last week against the US dollar, some correction is expected this week in NZD / USD, GBP / USD pairs.
Tomorrow (20:00 GMT) RBNZ will publish a semi-annual report on financial stability. If the report contains information about the difficulties and problems of the effectiveness of the financial system of New Zealand, the New Zealand currency after strong growth last week could significantly adjust, including in the pair GBP / NZD.
Support and resistance levels
The pair GBP / NZD broke through the short-term support level 1.8460 (EMA200 on 1-hour and 4-hour charts) and fell to the key support level 1.8190 (EMA200 on the daily chart).
Near the level of 1.8460 also passes the bottom line of the rising channel on the daily chart.
Despite the fact that OsMA and Stochastic indicators on the daily and weekly charts recommend sales, on short-term periods (1-hour and 4-hour) the indicators turned to long positions, signaling an upward correction. If the NZD / USD pair returns to a zone above 1.8460, its further growth may resume. The closest target will be the recent May highs near the level of 1.8490. More distant targets will be the levels of 1.9300, near which there is an upper bound of the rising channel on the daily chart, 1.9750 (EMA200 on the weekly chart).
The key date in the further dynamics of the GBP / NZD pair will be June 8, when extraordinary elections to the British Parliament will be held. If the Conservatives win at the head of Prime Minister Theresa May, the pound may sharply strengthen in the currency market, including in the GBP / NZD pair.
The reverse scenario will be connected with the breakdown of the support level 1.8050 (EMA144 on the daily chart) and further decrease towards annual lows near the level of 1.6850.
Support levels: 1.8050, 1.7800, 1.7500, 1.7200, 1.6850
Resistance levels: 1.8460, 1.8940, 1.9300, 1.9750
Sell Stop 1.8130. Stop-Loss 1.8210. Take-Profit 1.8050, 1.7800, 1.7500, 1.7200, 1.6850
Buy Stop 1.8210. Stop-Loss 1.8130. Take-Profit 1.8460, 1.8940, 1.9300, 1.9750
*) Actual and detailed analytics can be found on the Tifia website at tifia.com/analytics