RBNZ hikes; GBP/NZD gets whacked

The RBNZ hiked rates 25bps to 1.00% and gave a rather hawkish outlook to its guidance moving forward.

Downtrend 1

The RBNZ hiked rates 25bps to 1.00% and gave a rather hawkish outlook to its guidance moving forward.  Members raised their guidance for the one-year OCR rate from 2.5% previously to 3.25%.  In addition, the committee said that it will begin reducing bond holdings purchased under the Large-Scale Asset Purchase (LSAP) Program in July by selling 5 billion New Zealand dollars’ worth of bonds per year and by not reinvesting proceeds from bond maturities. See our complete RBNZ recap here.  As a result of the hawkish tone to meeting, the New Zealand Dollar went bid.

GBP/NZD was one currency pair that got hit due to the strong New Zealand Dollar.  The pair formed and inverted head and shoulders pattern during the Fall of 2021 and broke above the neckline of the pattern on December 17th, 2021, near 1.9600.  The target for the pattern is the height from neckline to the head, added to the breakout point of the neckline.  In this case the target was near 2.0475.  Due the expected hawkishness of the BOE, the pair rallied and reached the target by January 28th, making a high of 2.0535 on February 3rd.  The pair has been moving lower since, down over 335 pips in just 2 days.

20220223 gbpnzd daily

Source: Tradingview, Stone X

On a 240-minute chart, GBP/NZD is running into support at the 38.2% Fibonacci retracement level from the low of November 8th to the recent highs on February 3rd, near 1.9893.  Below there is a confluence of support at the 200 Day Moving Average (see daily), the 50% retracement of the same timeframe, and horizontal support between 1.9689 and 1.9713.  The 61.8% Fibonacci retracement is next level of support at 1.9496.  However, notice that the RSI is in oversold territory, indicating GBP/NZD may have fallen too far, too fast, and may be ready for a bounce.  First resistance is at the February 22nd highs of 2.0227.  Above there, price can retrace back to the highs of February 3rd at 2.0535.

20220223 gbpnzd 240

Source: Tradingview, Stone X

The RBNZ raised rates and continued with its hawkish tone.  As a result, the New Zealand Dollar went bid and dragged GBP/NZD down.  However, the next BOE meeting is on March 17th.  Recall that the BOE was also hawkish at the last meeting on February 3rd, as they nearly hiked 50bps.  Not much has changed on that front.  Watch the Fibonacci retracement levels below current price for possible areas where GBP/NZD may pause or reverse, especially as we get closer to March 17th!

 

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Open an Account