NZD turns neutral

New Zealand Dollar Research Report

NZD turns neutral

Sterling New Zealand Dollar (GBPNZD) FX Technical Analysis

After the aggressive sell off witnessed in the Kiwi dollar in January it's maintained its composure this month. RBNZ Governor Graeme Wheeler was reasonably neutral in his interest rate commentary at the start of February and the stronger employment and retail data will have buoyed the central banks' assessment of their wait-and-see approach in setting future interest rate direction. The recovery in dairy prices was also greeted with enthusiasm but some analysts are still bearish about the Kiwi dollar over the next few months. It's certainly true that Wheeler believes the resilience in NZD is hampering efforts to stimulate growth in the economy so it's quite conceivable that he'll continue to jaw-bone the dollar down whilst the Bank of New Zealand could still intervene in the currency markets if NZDUSD were to break up through 0.76 towards 0.80 again.

Technically GBPNZD is still struggling to get through major resistance at 2.1040 hitting it in 2011, 2012 and again 2014 ....It's getting close but just failed this month at 2.09 and with the RSI's crossing below the 50 line and the market holding below the 20 day moving average there's a chance it'll fail to break higher once more. Might be a nice wedge formation occurring after the strong rally from 2015 lows and currently short term support comes in at 2.0360 and on the topside resistance 2.0750-2.08. A period of increased volatility is just around the corner noted by the very narrow bollinger bands - over the next 2-3 weeks we'll likely see 3-4% range (as evidenced in early Sept and again late Dec).

Whilst I'd love to be writing that GBPNZD is finally going to break up towards 2.20 I fear we've got a bit more of a wait on our hands. Nonetheless it pays to use limit and stop loss orders to your advantage whether you're a NZD buyer or seller - particularly because they have 24 hours coverage and price spikes can happen throughout the trading day/night.

Buyers

It would be sensible to have a stop loss order at 2.00, comfortably below short term support whilst guarding against the risk of a deeper reversal down to 1.9250. On the topside having limit orders at 2.07-2.08 are within the trading range so trade a portion here. Looking forward the fact that 2.1040 has held on three occasions whilst GBPNZD lows have been consecutively higher lows bode well as often in technical analysis the rule of 3 applies - 3 tests of a resistance level before breaking through on the 4th.

Sellers

Target 2.03-2.05 on a limit order with a stop loss order above 2.1040 and if GBPNZD fails and breaks down through 2.00 put orders in to target 1.9500.