Market News & Analysis
GBP and NZD shine
Tony Sycamore March 12, 2019 3:31 PM
Excitement this morning in early Asia, as GBPUSD rallied to a high of 1.3290 following a Bloomberg headline stating that, "May's Deputy says govt has secured changes to Brexit deal". This move followed on from rumours earlier in the day that PM May had travelled to Strasbourg after German Chancellor Merkel had alluded to a potentially very important Brexit offer from the EU.
At a press conference later in the morning, EU president Jean-Claude Juncker confirmed that at the meeting extra-legal assurances had been agreed but warned: “there will be no new negotiations” and “It’s this deal or Brexit might not happen at all”.
While it remains to be seen if the reworded Brexit deal meets with Parliamentary approval, one thing we can deduce is that after its rally this year, GBPUSD has been the best performer in G10 FX year, and that as a result the market is likely now long GBPUSD and short EURGBP. Providing GBPUSD does not close below the 200-day moving average (currently at 1.2990), there appears to be scope for the rally to continue towards the June 2018 high at 1.3473. Conversely a daily close below 1.2990/60 support, might prompt a few of the more recent buyers of GBP to reconsider.
Also doing well overnight was the NZDUSD which has very much been flying under the radar with the Antipodean spotlight firmly focused on the RBA and the AUD in recent weeks.
A couple of points to note here. Firstly, in a world where Central Banks have been falling over themselves to turn dovish this year, the RBNZ at its meeting in February, surprised the market by delivering a very neutral statement. While most observers do expect the next move from the RBNZ to be an interest rate cut, domestic data remains resilient, inflation is heading in the right direction and so too are global developments with China and the U.S. reportedly closing in on a trade deal.
Highlighting the last point, China is New Zealand’s largest export market and dairy, New Zealand’s largest export. Last week dairy prices rose over 3% with whole milk powder rising 6%. The seventh consecutive rise in prices at the Global Dairy Auction and a development that suggests the trend of higher dairy prices will continue at least in the near term as the Chinese economy shows signs of improvement.
The picture outlined above is also reflected in the chart of the NZDUSD below. After completing a 5-wave rally at the end of 2018, the NZDUSD looks to be in the final stages of an “abcde” corrective pattern that finished at last week’s .6745 low. From here, a break/close above the .6920/40 resistance zone would indicate that a new impulsive 5-wave sequence has commenced, which targets a move to .7100c.
Therefore, my bias is to the upside and I will stay with this view unless the NZDUSD was to break below near-term support at last week’s .6745 low and below the medium-term support .6720/00.
Source Tradingview. The figures stated are as of the 12th of March 2019. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation
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