GBP/NZD is about to test a 3 year trendline after a week of Brexit turmoil

• GBP/NZD is over 1% lower on Thursday after more negative Brexit news.
• The price is heading towards some key technical levels on the downside.

Fundamental backdrop

The UK government have announced they could be breaking international law if they change the treaty but the UK want Nothern Ireland in the UK customs union. 

At the beginning of the debacle, the government said it was making "minor clarifications in extremely specific areas". Delegates in Brussels and Westminster could see the government might try to change the withdrawal agreement, which became international law when the UK left the EU in January.

Lord Frost who is the UK's Chief Brexit negotiator said the UK wants to "drive home our clear message that we must make progress this week if we are to reach an agreement in time". Well, that does not seem to working out too well. 

The German ambassador stated in a tweet: "In more than 30 years as a diplomat I have not experienced such a fast, intentional and profound deterioration of a negotiation. If you believe in partnership between the UK and the EU like I do then don't accept it.".

Lastly, Lord Frost went on to say: 

“We remain committed to working hard to reach agreement by the middle of October, as the Prime Minister set out earlier this week.

“We have agreed to meet again, as planned, in Brussels next week to continue discussions.”

GBP/NZD weekly chart

Looking at the weekly chart below it is clear to see the price capitulation. The black trendline is now the next hurdle for the bears. Close to the level is the 200 Simple Moving Average and then the next main support at 1.90. If the level does get taken out then the bulls may go on to target the red horizontal line at 1.85. 

To put this move into perspective, the price has fallen over 11.5% since the price peak in March 2020. Obviously things could get worse as the low on the chart is the purple line just under 1.70. The indicators are still painting a bearish picture, the Relative Strength Index has pushed firmly below the 50 area and the MACD signal lines are under the mid-level. Lastly, the MACD histogram has not crossed over just yet but the bars area clearly diminishing in size. 

Additional levels