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Analyst Pick: GBP/NZD, GBP/AUD Nearing Critical Support Levels

Analyst Pick: GBP/NZD, GBP/AUD Nearing Critical Support Levels

2021-01-07 12:10:00
Martin Essex, MSTA, Analyst

GBP/NZD, GBP/AUD prices and analysis:

  • GBP/NZD has dropped sharply since reaching its recent high at 2.0272 on August 22, falling to a low of 1.8523 on December 11. Now it looks to be heading back towards that low and if it breaks through its decline will likely resume.
  • GBP/AUD is even closer to the recent low of 1.7426 touched on December 11 and, similarly, it could drop back if that level is breached convincingly.
  • Note, though, these support levels could hold and both crosses will likely rally longer term whether or not they do.
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GBP/NZD, GBP/AUD at risk of further short-term losses

The British Pound, the New Zealand Dollar and the Australian Dollar have all benefited in recent weeks from US Dollar weakness as investors grow in confidence and move out of the safe-haven USD into more risky currencies. That confidence has been due largely to hopes that a fiscal package will be introduced by President-elect Joe Biden after his inauguration and that his package, combined with coronavirus vaccines, will lift the global economy out of its current slump.

However, NZD and AUD have benefited more than GBP and that outperformance could continue in the days ahead. As the chart of GBP/NZD below shows, a recovery in the pair that began just over a month ago has now run out of steam, putting the recent low at 1.8523 in investors’ sights. If it breaks through, there is little further support until the low at 1.8280 touched back in July 2019.

GBP/NZD Price Chart, Daily Timeframe (August 13, 2020 – January 7, 2021)

Latest GBP/NZD price chart.

Source: IG (You can click on it for a larger image)

Note, though, that this support could hold and the longer-term outlook for GBP/NZD is, in this analyst’s opinion, more positive. Indeed I chose long GBP/NZD as my top trading tip for the first quarter of 2021. In other words, if support holds it could prompt a sizeable climb in the cross and even if it breaks through a rally could follow later.

GBP/AUD is even closer to the recent low at 1.7426, breaching it briefly on two successive days this week before regaining some of the lost ground.

GBP/AUD Price Chart, Daily Timeframe (August 13, 2020 – January 7, 2021)

Latest GBP/AUD price chart.

Source: IG (You can click on it for a larger image)

While a breakthrough is possible, the bounce is a positive signal suggesting a rally longer term even though further near-term losses cannot be ruled out.

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--- Written by Martin Essex, Analyst

Feel free to contact me on Twitter @MartinSEssex

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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