GBPNZD has been treading higher on its short-term time frames, creating a rising wedge pattern on its 1-hour chart. Price has recently bounced off support at the 2.1200 major psychological level and is making its way to the top around 2.1500.
If the top of the wedge holds as resistance, price could head back to the bottom to test support once more. Stochastic is still pointing up, indicating that price could reach the top of the wedge later on.
In case a breakout in any direction occurs, the resulting move might last by around 900 pips, which is roughly the same height as the chart pattern. This pair tends to be a volatile one though so wide stops are recommended.
The short-term exponential moving average is cruising above the long-term exponential moving average, confirming that further gains are likely. With that, the path of least resistance is to the upside, and this is supported by fundamentals.
Earlier this week, Fonterra announced another downgrade in milk payout forecasts for its dairy farmers, citing that global prices have failed to pick up. Speculations of another RBNZ interest rate cut have also been weighing on the Kiwi recently, as the central bank implemented measures to curb housing inflation ahead of time.
Meanwhile, data from the UK has been mixed, with the inflation report showing a negative core figure and the retail sales report churning out stronger than expected readings. Still, the BOE has maintained that their next policy move is still likely to be a rate hike.
By Kate Curtis from Trader’s Way