GBP/NZD Potential Buy position Macro + Technical Analysis Great Britain Pound vs New Zealand DollarVANTAGE:GBPNZDanonymousbutterflyGBP/NZD – Macro & Technical analysis 1. Global macro environment The current environment remains relatively uncertain due to geopolitical tensions with the US-Iranian conflict and energy market volatility. In such conditions, markets can shift toward risk-off dynamics, where investors move capital away from risk-on currencies and toward more stable currencies/assets. We can already observe a relatively small decline on US indices but still controlled, and an increase of bonds yield. The NZD (as well as the Australian Dollar or the S&P 500), is a risk-on asset which can weaken when global uncertainty is starting to scare investors. 2. Monetary policies and inflation There is a divergence in monetary policy between the BoE and the RBNZ. BoE policy rate : ~3.75% : The BoE was supposed to cut rates 3 times this year, but is now more cautious regarding cuts because inflation in the UK remains above the 2% target (3%) and because of the potential increase in oil prices. A sudden hike is seen as possible but less probable, which could potentially surprise investors and reprice the pound. RBNZ policy rate : ~2.25% : The RBNZ was also seen as more neutral or slightly dovish, as inflation pressures have been easing, but with the risk of higher inflation in the coming weeks, a more hawkish stance would not be improbable. However, this divergence tends to favor the British pound over the New Zealand dollar, as a carry trade would benefit pound holders. 3. Yield Spread 2-Year Bonds Yields : UK : ~4.1% New Zealand : ~3.4% Short-term yields are especially important for FX because they reflect expectations about central bank policy, and in this situation favors GDP. Technical Perspective From a technical perspective, GBP/NZD is showing signs of a potential bullish structure, even though we can see it “broke” the daily upward trendline, I don’t think there is any reason to start selling this pair purely based on technical analysis. Price recently formed a double bottom, which suggests that selling pressure may be fading, and it could look more like a correction rather than a break of structure. The pair reacted well around the 50% Fibonacci retracement of the major bearish move that started in early January and the RSI is starting to recover, suggesting that bullish momentum can gradually return. I would like to enter around the 50% fibonacci that you can see on the graph, but remember that we have the BoE interest rate decision next thursday so I will see if I prefer to enter before that if the price comes back to my zones and capitalize on the momentum or take less risk.