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It looks as though GBP/NZD wants to print new highs.
The new week sees the Pound-to-New Zealand Dollar exchange rate (GBP/NZD) itching to break to new highs.
At 2.2743, GBP/NZD is at its highest since March 13 (2.2754), and rolling back the calendar will show that anything above here was last seen in December 2015.
These are therefore strong levels for NZD buyers, and there is some benefit in waiting to see whether the coming days unveil fresh strength.
It is certainly going to be an interesting week with the U.S. unveiling a far-reaching reciprocal tariff package that should be particularly painful for Asian economies.
This is because Asia accounts for a significant portion of trade with the U.S. while overseeing some notable trade barriers on U.S. imports, something Trump wants to rectify.
Above: GBP/NZD at daily intervals.
As a G10 proxy currency for Asian exposure, the New Zealand Dollar is naturally under pressure in anticipation of the announcements.
"AUD and NZD have been the big losers in the G10 in the second half of March as pressure from Chinese yuan proxy trades intensified. We don’t see much respite in sight given our relatively pessimistic view on the US trade policy to be rolled out in April," says Francesco Pesole, FX Strategist at ING Bank.
Bear in mind that there is a notable amount of uncertainty heading into the Wednesday announcements, and the weakness seen on Monday could be the market getting itself ahead of the developments.
This does open the door to a relief rally following the announcements, which would be in keeping with a penchant for financial markets to front-run developments.
This creates a setup whereby the NZD rallies on the day, and GBP/NZD dips from recent highs.
Yet, the bigger picture from both a fundamental and technical perspective is pivoted towards the rally in GBP/NZD extending.
Fundamentally, the world is entering a period of elevated trade tensions, with tariffs and counter-tariffs set to continue.
This would likely keep those currencies that have struggled under the regime under pressure. Hence, NZD's weakness will extend.
From a technical perspective, the chart is pointed higher, with GBP/NZD dips being bought into and the next leg of the rally likely to bring in 2.37 into scope towards mid-year.