Pound Set to Strengthen Further Against New Zealand Dollar
The British pound is set to continue its upward trajectory against the New Zealand dollar this week, reaching its highest level since 2015. The exchange rate has broken through the July peak, which had acted as a ceiling throughout the summer, and is now trading at levels not seen in nearly a decade. This breakout suggests the uptrend has further room to run, although momentum indicators like the relative strength index (RSI) are stretched, hinting at a potential pause.
Technically, the monthly chart shows that the pound last traded at these levels against the New Zealand dollar in 2015. With the July peak now cleared, the next significant resistance is near 2.4150, a level last seen at the peak of that year. The daily chart indicates that the pound is currently trading at 2.3645, having surpassed the horizontal resistance at 2.3536. This broken resistance now serves as the first support level, reinforcing the breakout's validity.
The New Zealand dollar's weakness is attributed to specific issues rather than broader regional challenges. While the Australian dollar has held steady, the New Zealand dollar has struggled, partly due to a lack of response to the Reserve Bank of New Zealand's (RBNZ) hawkish stance. Barclays strategists note that despite market expectations of restrictive policy, the New Zealand dollar has not rallied, raising concerns about underlying economic challenges. Additionally, rising volatility in global markets, particularly in the Euro-Dollar pair, is putting carry trades involving the New Zealand dollar at risk, further weakening its position.
Upcoming economic releases, such as New Zealand's GlobalDairyTrade auction and the NZIER quarterly survey of business opinion, along with the UK's services and construction PMIs, are not expected to disrupt the current trend. The next RBNZ decision on October 28, coinciding with the UK Budget, will be a key event to watch. For now, the pound's advance against the New Zealand dollar is expected to continue, with pullbacks likely to find support near the 2.3536 level.