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GBP/NZD rallies are capped for now, but the charts hint at an eventual move higher through a sticky point of resistance.
The pound-New Zealand dollar exchange rate trades at 2.3029 on Tuesday having failed to hold attempted breaches of the 2.3050 level during the course of recent days.
This inability to launch indicates a lack of near-term demand for sterling above 2.3050, which is the 61.8% Fibonacci retracement of the January-February selloff. In fact, during the course of April, rallies above here were routinely rejected, confirming it as an important resistance area.
Respecting the messages of the charts leads us to forecast GBP/NZD to remain contained below here in the coming days.
At the same time this consolidation won't last indefinitely as periods of weakness are tending to be picked up at the 200-day moving average, which is now at 2.2980.
The 200-day MA is pointing higher, which means we could ultimately expect GBP/NZD to end its consolidative phase by trading above 2.3050 and targeting 2.3229 (this is the 78.6% Fib level).
GBP/NZD can be expected to find some support in the coming days if anxieties over the situation in the Middle East continue to build.
A fragile ceasefire is unfolding after the United States moved to reopen the Strait of Hormuz, triggering an escalation in hostilities.
U.S. forces are attempting to escort commercial shipping through the pinch-point, successfully guiding two American‑flagged merchant vessels, while around 50 others were reportedly diverted as the U.S. enforced a blockade on Iranian ports.
Iran responded by firing cruise missiles at the UAE and attacking U.S. military assets.
"USD rose against all G10 currencies overnight with the exception of the Norwegian krone, as oil prices rose amid escalating tensions in the Middle East. SEK, AUD and NZD underperformed," says a daily market briefing note from ANZ.
GBP/NZD upside will meanwhile likely be limited by the looming local and devolved authority elections, which should result in a drubbing for Keir Starmer's Labour Party.
How the party, and Starmer himself, react will be important: any lurch leftwards and we're in a touchy period for UK bond markets, and the pound.
For now markets are happy to watch, but it's a risk worth keeping in mind when chasing GBP upside.