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The pound to New Zealand exchange rate (GBP/NZD) displays an intact upside slant.
Having popped to 2.3455 last week, it has since retreated to 2.3389 on Monday.
Yet, gains above 2.34 are proving difficult to sustain, with the last daily close above this level being on December 31.
So January can be summarised as a case of failed attempts to register a solid gain, as there has not been much traction to sustain them and build an uptrend.
The staid nature of GBP/NZD trade mirrors what we are seeing in GBP/AUD. This suggests to us that it's hard to push against the NZD and AUD owing to the view that both the RBNZ and RBA could raise rates later this year.
Nevertheless, GBP/NZD trades above its key moving averages, including the nine-day exponential moving average (EMA), which is still pointing up:
The nine-day EMA is arresting declines, which means pullbacks are proving shallower and shallower, consistent with a short-term uptrend. So while we're not seeing much progress to the upside, the downside is becoming shallower and shallower, indicating buyers are to be found on dips.
This is why our Week Ahead Forecast has a constructive slant that advocates for further gains in the coming days.
But, we're decidedly unambitious here owing to the low volatility in GBP/NZD and have set our sights on a target of 2.3429, last Friday's high.
When volatility picks up, we would be biased to a break higher that ultimately tests the 2025 high at 2.3555.
A potential volatility trigger could be next week's UK inflation and labour market reports. Here, a below-consensus reading would send GBP lower and potentially put an end to GBP/NZD's multi-year advance.
But, sentiment towards pound sterling and the UK economy is decidedly downbeat, leaving ample room for the pound to surprise to the upside.
If so, then GBP/NZD will resolve the current low volatility period with a renewed advance.