As every other cross rate, GBP/NZD has two components: GBP/USD and NZD/USD. The direction of the cross rate is determined by the difference of momentum in one of the components related to the greenback. For example, one pair could rise faster than the other one and this difference creates pressure on the cross. Sometimes the components can diverge, meaning that they can move in opposite directions. In this case, the momentum of the cross rate accelerates and it moves rapidly.
Let’s try to analyze the latest performance of both components. NZD/USD has been going north for several weeks in a row, without any significant retracements. There has to be a retracement sooner or later, does not matter about further direction. We’ve got one of the first fundamental confirmations, New Zealand Electronic Card Retail Sales in December has been released weaker than previous month.
GBP/USD has more potential to rise without pullbacks. The pair has breached a level of 1.38000 on Monday, and there is no significant resistance until 1.39750 approximately. Fundamentally, there is a rumor from Britain about ‘softer Brexit’ deal with EU. Remainers camp has a majority in parliament now, so leavers cannot dictate their conditions any more. Of course, we need to get a confirmation from British economy. Inflation figures a scheduled to release today, on Tuesday and traders will be also watching the retail sales on Friday.
Technical background of possible reversal is illustrated below. We already went long on GBP/NZD yesterday, and all of our clients received these charts in time. So please contact us if you want to get fresh analysis in real time conditions.
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