GBPNZD Forecast Bullish (Mar, 2021) - The Pandemic Pound Recovery?

One very interesting news from the Bank of England was that the economy is expected to reach growth expectations 6 months in advance. Unemployment rates are also expected to peak at 6.6% rather than 7.5% which are all great signs for the UK.

"There is light at the end of the tunnel" - Bank of England, Andrew Bailey

Furlough a great government support scheme in the UK is set to end during the end of September. This should help with unemployment rates until then to see how effective the economy will recover during April and June.

If the economy still sees low growth then we may see unemployment rates rise after September a businesses cut costs to survive.

GBP/NZD Fundamental Summary - LONG

Overall, the fundamentals are looking strong for the UK in comparison to New Zealand. The Macro Currency Strength meter and the other indicators in the Logikfx Technology bundle are showing bullish signs.

The Currency Strength Meter is in a great position, you can see that there's a crossover about to happen which might be the start of fundamental strength in the UK and weakness in New Zealand as both currencies crossover.

Overall, the economic signals are looking bullish.

Net GDP Growth Differentials

Overall, the GDP growth differentials were looking strong moving into 2021 and the UK is expected to outpace New Zealand which is great. There's a negligible difference in expected growth for 2022 hitting a -0.9% change.

This is slightly bearish for the idea we had in mind with most our economic signals pointing towards a bullish run now on GBPNZD.

A2 Milk vs GBPNZD

We're analysing dairy again with New Zealand as it's one of the major exports, A2 Milk or ATM for short is one of the bigger manufacturers of dairy products which are exported globally.

Interesting data over the past 10 years has shown a negative correlation with A2 Milk and GBPNZD. A2 Milk has peaked in 2020 now starting to take a huge hit post-pandemic.

The negative growth combined with an inverse correlation shows that there's potentially a bullish move coming for GBPNZD...

Overall A2 Milk agrees with the bullish idea.

GBPNZD vs New Zealand AIR

Airlines are another sector heavily impacted by the pandemic but potentially set for a recovery. AIR is one of New Zealand's biggest airlines which took a massive hit as travel restrictions were put in place.

Now that lockdown is easing travel is opening up more and this is a bullish signal for airlines.

Overall however there's a slightly negative correlation again creating an inverse relationship between GBPNZD and AIR.

The recent negative growth on AIR is therefore actually quite bullish on GBPNZD.

However, if we see AIR create new highs then this will create a negative effect and create a bearish outlook on GBPNZD.

Net Interest Rate Differentials

Overall, hot money flow isn't looking great as both the central banks have made interest rates.

The overall differential is slightly bearish but sitting at a change of -0.15%... this is quite a small change but overall slightly bearish so disagrees with the bullish idea.

Overall interest rates disagree with the bullish idea.

GBPNZD vs FTSE100(NZD)

The FTSE100 is the UK's main stock index and a barometer of overall wealth in the UK. The pandemic took a huge hit and hasn't really recovered since March 2020.

However, signs have been bullish the FTSE100 (NZD) has been growing quickly over the past few months and looking to recover this year.

The growth could be in anticipation of the UK businesses opening in April/ June 2021.

Overall stock market is not agreeing, but it's been growing which could be a leading signal of future growth.

Commitment of Traders Analysis

The commitment of traders report or COT report forex for short is a sentiment tool to get a view of if you're trading against or with the markets.

Overall, the green line showing the difference in the net hedge fund open interest shows that hedge funds are buying more GBP than NZD.

This is a potentially bullish sign as it's just tipped the scales above zero.

If this trend was to continue then next week we'd want NZD open interest to fall and GBP open interest to increase.

This would cause the green line to increase over the indicator.

if you're interested in a full guide on how to analyse the cot report click here.

GBPNZD Price Trend - Technical Analysis

The technical analysis is overall quite bullish.

There are 3 major areas of support outlined in the red arrows.

Buyers have taken control over the past couple months and our fundamental bias has now changed from bearish to bullish as data comes through.

The continuous buying power is a great sign that sellers are no longer in control and buying power is increasing.

The final step would be to use volatility and work out the stop loss and take profit targets using the average true range.

You could use any technical analysis at this point... a good indicator to use with confluence could be Bollinger bands. Here's a full guide on how to use it.

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