Checking out a solid technical long-term setup on GBP/NZD ahead of the major event out of New Zealand. Will the upcoming central bank events get traders back into sell mode?
Longer-term Downtrend to Hold in GBP/NZD?
It looks like the switch to bear mode back in September is legit on GBP/NZD with the pair falling 1200 pips (-6.00%) since then, and with this bounce we’ve seen this week, the question now is whether trend traders will hop back in?
Well, the answer to that question will likely rest on what we see from the Reserve Bank of New Zealand, who will be giving their latest monetary policy statement later the upcoming Asia session. The market is looking for a small bump in interest rates from 0.50% to 0.75%, a scenario that is likely the reason why we saw the Kiwi broadly rally for the last two months.
So with a hike is likely already priced in, traders will be on the lookout to see if it’s a one and done event, or if there will be more policy tightening moves to come. If they do hint at more hike soon, then this bounce in GBP/NZD may quickly draw in sellers after the event, both fundamental traders and technical traders who see the major area of interest retest, falling ‘highs’ pattern and Fibonacci retracement area all lining up together.
If we don’t see hints of additional rate hikes or if the RBNZ surprises traders with no rate hike at all, then this bounce in GBP/NZD may just be the beginning of a stronger move higher. In that scenario, we’d be on the lookout for a sustained break of the falling ‘highs’ pattern before considering a potential long position. Beside momentum technical players, this scenario could draw in NZD long profit takers and fresh NZD bears.
What do you all think? Is this week’s bounce in GBP/NZD an opportunity to play the downtrend for the bears? Or have the bulls already taken back control?
