The GBPNZD currency pair has been in the spotlight recently, navigating through a flurry of economic developments that have injected fresh vigour into its dynamics. Notably, New Zealand’s latest GDP data brought surprises to the market as it slipped into negative territory on a year-over-year basis, recording -0.6%. This downturn defied the prior consensus of 0.5%, following a robust 1.5%. Additionally, New Zealand experienced a slight easing in food inflation, moving from 6.3% to 6%, exerting downward pressure on the New Zealand dollar.
Meanwhile, across the pond in the UK, the Bank of England opted to maintain its interest rates at the current 5.25%. However, the central bank underscored the potential necessity to uphold a restrictive monetary policy for an extended duration. Emphasizing their commitment to tackling inflationary pressures, the bank hinted at the possibility of further rate hikes. Notably, three members voted in favour of a 25 basis points hike, signalling a keen awareness that the hiking cycle might not have reached its conclusion.
Technical
On the 4H chart, there was a period of consolidation between 2.0411 and 2.0591. An attempted breakdown failed to sustain, and the uncertainty was highlighted by the convergence of the 25-SMA (green line) with the 50-SMA (blue line).
A prior breakdown at the support of this range failed to sustain, and the subsequent retracement is now in full force. However, strong resistance is established at the 61.8% Fibonacci golden ratio of 2.0468, where it converges with the 25-SMA and 50-SMA. If the momentum manages to break through this resistance level, the retracement could continue to 2.0558, where the 100-SMA (orange line) could cap the gains.
However, the bullish momentum may wane if the resistance at 2.0468 holds. The Fibonacci midpoint at 2.0426 could then be a level of interest before the support of the prior consolidation range could once again come under question at 2.0411.
Summary
With a hawkish stance from the BoE, the GBPNZD currency pair has found renewed strength. However, psychological resistance at 2.0468 could cap the optimism in the upcoming sessions if the current rally fails to initiate a breakout above this level.
Sources: Koyfin, Tradingview
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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