Pound relief rally short lived, kiwi pressure persists

The British pound tops the performance charts against the greenback early in North American trade. The sterling advanced more than 0.50% as US equity markets drifted in and out of positive territory. The sterling has come under tremendous pressure since the August 19th peak at 1.6620 on speculation that the BoE will need to further expand monetary easing to help support the ailed economy. The pound has fallen more than 7.2% since the August highs before encountering support at 1.5340. The GBPUSD pair has continued to hold within a descending channel formation dating back to the mid August and may test upper bound trendline resistance. This relief rally is expected to be short lived however, noting interim resistance at 1.5550, the 1.56-figure, and the 100% Fibonacci extension taken from the April 28th and August 19th crests at 1.5650. The longer-term outlook for the sterling remains weighted to the downside noting support at the 1.55-handle with subsequent floors eyed at 1.5450, the 1.54-figure, and 1.5340.

Key Levels/Indicators

The New Zealand dollar is the worst performer against a stronger greenback an hour into US trade after falling more than 0.50%. As noted in this week’s kiwi forecast, the currency is likely to remain under pressure as global growth concerns persist amid domestic fears of an economic slowdown. The NZD/USD pair encountered resistance at the 0.78-figure before rebounding sharply to the downside. Interim support rests at the 100% Fibonacci extension taken from the July 31st and August 31st crests at 0.7680. Subsequent floors are seen at 0.7650, the 0.76-handle, and 0.7570. A break above interim resistance at the figure eyes subsequent ceilings at the 76.4% extension at 0.7890, the 0.80-handle, and the 61.8% extension at 0.8020. There is no data on tap from New Zealand so price action will be largely dictated by broader market sentiment with the kiwi continuing to suffer on the back of risk aversion flows into lower yielding ‘safer’ assets.

Key Levels/Indicators

Michael Boutros, Currency Analyst for DailyFX.com is a Technical/Fundamental Analyst specializing in the FX markets. E-mail: mboutros@fxcm.com.

Twitter: @MBForex
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