After last week’s notable 1.67% upswing in the GBPNZD currency pair, it is gearing up for an impressive fourth consecutive week of gains, launching into the new week with the same vigour. The recent surge found its roots in the unexpectedly robust inflation figures from the UK, bolstering the strength of the British Pound.
However, the dynamics could swiftly shift with New Zealand’s upcoming inflation data scheduled for Tuesday. Projections anticipate a year-over-year decline from 5.6% to 4.7% and a quarterly drop from 1.8% to 0.5%. Should the expected slowdown in inflation falter, there’s a possibility of the New Zealand Dollar gaining strength, introducing an element of risk to the recent upward trajectory of the GBPNZD currency pair.
Technical
On the 4H chart, the currency pair has broken through the dynamic resistance of an ascending channel, potentially signalling a breakout toward a steeper uptrend in the upcoming sessions. However, a pullback could be on the cards with volumes declining and the RSI signalling potential divergence.
A retest is currently underway at the dynamic resistance, and support at 2.0797 could be a level of interest, as it is backed by the 25-SMA (green line). Any movement below this level could signal a sustainable pullback, bringing support at 2.0684 into the picture near the dynamic support of the channel. At this level, a bullish pivot could occur if the price action can prevent falling below the 50-SMA (blue line) at 2.0638.
However, the bullish trend could continue if the currency pair maintains its trajectory above 2.0797. In this case, a supply zone at 2.0936 could be important to determine whether the momentum can be sustained higher in the upcoming sessions.
Summary
As the latest New Zealand inflation report approaches, the GBPNZD currency pair’s uptrend is at risk, with the RSI and declining volumes signalling a potential pullback. With fundamental confirmation from higher-than-expected inflation, this pullback could occur toward 2.0684.
Sources: Koyfin, Tradingview
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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