GBPNZD Countertrend Play (Jun 19, 2017)

GBPNZD has just bounced off its descending channel resistance and is making its way towards support. If the bottom at the 1.7300 handle holds, price could make another test of resistance. Stochastic is already indicating oversold conditions, which means that sellers are tired and could let buyers take over.

However, the 100 SMA is below the 200 SMA so the path of least resistance is to the downside and the pair could be due for a break lower. In that case, price could establish a steeper selloff.

The pound drew some support from a surprisingly hawkish BOE decision but was unable to hold on to its gains versus the Kiwi, which is also waiting on a potentially hawkish central bank decision this week. Data from the UK economy has been mixed but inflation and consumer spending data signal that policymakers might need to tighten in order to keep growth supported.

Event risks for the week include headlines pertaining to Brexit talks and the Queen’s speech. There are speculations on a “hard Brexit” or even the possibility of a “no deal” situation which could be bearish for the currency. On the other hand, smooth negotiations could stoke expectations that the UK can emerge with a beneficial deal that would be bullish for the pound.

By Kate Curtis from  Trader’s Way