GBP/USD to tilt lower to reflect RBNZ/BoE imblance – DBS Bank

GBP/NZD has pulled up strongly from mid-November’s 1.8854 lows, piling up a robust 9% gain. The rally looks exhausted and is contained by a major Fibonacci marker at 2.0561, Benjamin Wong, Strategist at DBS Bank, report.

Pulling lower

“The RBNZ hiked 25 bps to bring the OCR to 1.00%; but in totality, it appears to be ahead of the BoE in coming to speed on policy normalisation as it scaled up its OCR projections path to peak at 3.4% in 2024 (currently OCR stands at 1.0%). RBNZ hawkishness undermines this cross.”

“Given the cross has rallied from December 2020’s 1.8524 lows, and the recent 2.0544 peak being a 14-month high, there remains scope for a probe towards the medium-term pivotal moving average at 1.9700.”

“A seemingly bearish head-and-shoulders top is testing both the Tenkan support peg of 2.0072 and 50-day moving average (DMA) at 2.0083. A pickup on the moving average convergence divergence (MACD) signal (about to turn negative) should grease a decline towards the 1.9663 cloud support. 200-DMA at 1.9689 would be resting within this price proximity too.”

“Fetching a 2.0544 high for most parts is contained and restrained by a meaningful 61.8% Fibonacci retracement at 2.0561.”