The Pound to New Zealand Dollar Recovers Aggressively After Breakdown

 

GBP/NZD has fallen to the bottom of a two-week channel where it is threatening to break lower, on the back of falling oil prices, if it does it will probably lead to a much deeper correction.

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Sterling gained against the New Zealand Dollar (Kiwi) on Tuesday after UK lending data showed a continued rise in borrowing, a sign of confidence amongst consumers.

Data from the Bank of England (BOE) showed credit rising by a higher-than-expected 1.618bn when estimates had been for only a 1.500bn increase.

Mortgage Approvals also rose higher-than-forecast, coming out at 67.5k in October, versus the 65.0k expected and higher than the 63.59k previously, showing buoyancy in the housing market.

GBP/NZD, which had fallen below the lower border of its rising channel, rebounded aggressively on Tuesday pushing back inside the channel.

The rising channel looks a little like a bearish trend reversal pattern called an ending diagonal or rising wedge.

Another breakout below the 1.7489 lows is likely to confirm the recent attempted bearish breakdown.

The next target will be at 1.7400, followed eventually by 1.7300, which corresponds to the height of the channel extrapolated down from the break.

The MACD momentum indicator is diverging bearishly with price and has now pushed below the zero-line signaling the pair is now in a downtrend.

In a healthy uptrend MACD would be expected to rise in line with price.

Despite these negative signs, however, the pair continues to make higher highs and higher lows and until we see a break below 1.7489 and out of the channel the dominant trend is still bullish, and potentially indicative of more upside.

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