GBPNZD has been trending lower on its 1-hour time frame, with a descending trend line connecting the latest highs of price action. The pair bounced off the 2.1000 major psychological mark and might be due for a pullback to the falling resistance area.
Using the Fib tool on the latest swing high and low shows that the 61.8% level lines up with the descending trend line. This also coincides with the 100 SMA and an area of interest. In addition, the 100 SMA is below the 200 SMA, confirming that the path of least resistance is still to the downside.
Meanwhile, stochastic is still on the move up so buyers are in control for now. However, once the oscillator reaches the overbought area and turns lower, sellers could take the upper hand and allow the downtrend to resume.
Event risks for this setup include the BOE interest rate decision today. No actual monetary policy changes are expected, as policymakers could keep asset purchases and interest rates unchanged, but any change in rhetoric could be crucial for pound direction.
Data from the UK has been mostly weaker than expected recently, with the exception of the latest batch of CPI readings. The headline CPI rose from 0.3% to 0.5% while core CPI improved from 1.2% to 1.5%.
As for the New Zealand dollar, the return in risk aversion is currently weighing on the currency, along with downbeat medium-tier reports. Earlier today, the Business NZ manufacturing index fell from 55.9 to 54.7 to indicate weaker growth. However, a deal among OPEC nations to cap oil production could result in commodity gains and a return in risk appetite.
By Kate Curtis from Trader’s Way