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The Pound to New Zealand Dollar exchange rate (GBP/NZD) is still pointed higher.
Last week saw the highest close in GBP/NZD since 2015 at 2.3105 amidst a new wave of broad NZD weakness, and we maintain a pro-upside bias for the coming days and weeks.
This is the only major GBP pair that is trending again and it brings some relative excitement to summer markets that are quite staid at the moment.
That being said, the rally to 2.3105 left the market overbought in the short-term with the Relative Strength Index (RSI) reaching the 70 level; anything at 70 and above signals overbought conditions and the requirement for a retracement or consolidation.
The exchange rate also diverged from the nine-day exponential moving average (EMA) quite substantially, further triggering caution and anticipation that a minor retreat was required.
That retracement occurred in the latter part of last week and early this week, taking the pair to 2.3004 and on course to reconnect with the rising nine-day EMA (the blue line):
Above: GBP/NZD at daily intervals with the RSI shown in the lower panel.
While above the nine-day EMA, our Week Ahead Forecast model remains constructive and favours the upside. For now, we don't see any real reason to believe that a break below here will materialise and the GBP/NZD is viewed as a buy-on-dips candidate.
Momentum signals are positive and advocating for further gains, and there is a good chance that a move to last Wednesday's high at 2.32 is a prospect for the coming weeks, even if it might be too soon to expect such a move this week.