The $GBPNZD opened the new trading week challenging major support around the 1.8931 level. It even managed to crack below the staunch zone of support as the new trading week got underway. This support level has been challenged by the $GBPNZD numerous times in just the past 6 weeks. But if you look out to the daily chart, the 1.8931 level was also important support back in December 2017. As one of those old trading adages go,
“If price is knocking along a certain level long enough, eventually something gotta give”
This is an interesting time in market fundamentals. The markets are starting to pay more attention to interest rates. As political uncertainty increases, the markets seem to be reverting to the familiar: its relationship with interest rates. With one of the highest interest rates of the major currencies, the New Zealand dollar has been quietly finding buyers on every dip. Even as the Great British pound has found new strength against the Canadian and Australian dollars, it is has not enjoyed the same strength versus the New Zealand dollar.
Since the market opened this week, the $GBPNZD has bounced off this support zone to rally over 100 pips during the Monday trading session. Now that the $GBPNZD is back at the top of its range, kiwi buyers may step here. Watch for $GBPNZD range traders to also step in as 1.9080 has become a first level of resistance for rallies in the $GBPNZD. A break above 1.9080 opens the way to the resistance level at 1.9200.
However, as the fundamentals continue to favor the higher-yielding currencies, watch the $GBPNZD within this range. A final crack below the support zone, will introduce fresh buying momentum in the New Zealand dollar and usher in a deeper correction of the recent $GBPNZD rally (on the bigger timeframes).