- GBP/NZD is showing signs of losing steam after a massive rally.
- The BOE's lack of strong determination has sent the cross to the edge of 2.0345.
- UK GDP is the next trigger to rock GBP/NZD amid a lack of events in New Zealand.
Where is GBP/NZD heading? We have received a question about this cross, which had a significant rally through early February. At that point, it began trading in a limited range, and may now find its way down.
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As the chart shows, GBP/NZD has been holding above 2.0345, which is now critical support. The lack of additional upside has not only pushed 4h-momentum down but also moved the cross below the 50 SMA.
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If GBP/NZD indeed falls, the first target is clear 2.0250, which was both a stepping stone on the way up and the 138.2% Fibonacci level when drawing a line from the recent peak to the bottom of the range at 2.0345.
The next lines to watch are 2.0230, which is the 161.8% Fibonacci level, and then 1.0150, which worked as both support and resistance in the past month.
GBP/NZD Fundamental Outlook
Fundamentally, GBP/NZD also lost some of its momentum after Bank of England Governor Andrew Bailey played down the pace of raising interest rates – despite overseeing a divided decision last week. Four out of nine members wanted a double-dose rate hike.
Both the BOE and the Reserve Bank of New Zealand are on a tightening path, but some of the sting has come out of sterling. Expectations from both central banks are now roughly balanced.
The next significant release is Britain's Gross Domestic Product figures for the fourth quarter of 2021. The data, due out on Friday, could push GBP/NZD over the edge of the cliff at 2.0345 line and quickly to 2.0250. That would require a disappointing statistic – and weak Christmas sales support it.
Conversely, November's upbeat GDP growth – 0.9% MoM – open the door to rapid expansion also in December. A strong number could trigger a bounce from 2.0345, and toward 2.0415, which is the 61.8% retracement of the recent fall, followed by 2.0450, a recent high.
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