GBP/NZD Decline Expected to Resume as August Recovery Fails

The GBP/NZD exchange rate has lost its momentum and is now expected to decline further. After a brief recovery in August, the market failed to close above its long-term average of 2.29950, which it had been moving towards for several weeks.

With no support from the UK calendar, which is mostly empty this week, and little help from the New Zealand calendar, the Pound faces a defensive task. The US Dollar's direction will be the dominant input for the GBP/NZD market in the coming days, particularly with Wednesday's inflation report and Friday's Jackson Hole speech by Federal Reserve Chair Kevin Warsh.

The 200-day moving average has been capping the market at around 2.3080 this month, and a close above it would be needed to revive the August recovery. However, resistance now begins at the early-August low of 2.2860, which was just broken, and then the July peak of 2.35440.

On the other hand, support is far away, with the next horizontal on the daily chart being 2.24000, more than four cents below spot. The medium-term picture remains bearish, especially while the 200-day caps the market.