One of the biggest under-the-radar trends over the last two months has been the jaw-dropping rally in GBPNZD. The volatile pair has exploded higher since mid-April, tacking on nearly 3,000 pips (no typo) over the last nine weeks on the back of improving economic data in the UK and an about-face from a mild tightening bias to outright loosening of monetary policy by the RBNZ (culminating in today’s rate cut and dovish statement). While the rally in GBPNZD has already been massive by any measure, there are still technical reasons to expect it stretch further as we head through the second half of June.
After forming an extended rounded bottom pattern dating all the way back to 2010, the GBPNZD rally kicked into overdrive with last month’s surge through multi-year resistance at 2.10. As of writing, the unit has now stretched all the way up to 2.2150, but there could still more gas in the tank based on the secondary indicators. The MACD is trending sharply higher above its signal line and the “0” level, showing strong and growing bullish momentum. For its part, the RSI has edged into overbought territory, raising a potential near-term yellow flag, but the mere fact that it was able to reach this milestone signals strong buying pressure in and of itself.
There are no more market-moving economic releases from either the UK or New Zealand this week, but the UK CPI report (Tuesday), New Zealand GDT auction (Tuesday), UK jobs report (Wednesday), NZ GDP (Wednesday night/Thursday morning), and UK Retail Sales report (Thursday) could all have a big impact on the pair next week. As it stands, the buyers may target the long-term 38.2% Fibonacci retracement at 2.2350 on the back of the strong bullish momentum as soon as next week. A pause or pullback is possible off that level, but the longer-term bias will remain bullish as long as rates hold above previous-resistance-turned-support at 2.10.