GBP/NZD might have been one of the less volatile currency pairs in the last couple of weeks, but it seems that a strong move is ahead of us.
The apparent downtrend is in the play
After the wild ride in September and October, GBP/NZD is trending downward at a slow pace. The head & shoulders pattern sent the currency pair lower, which is now regularly forming lower highs (LH) and lower lows. Now that we identified the trend, let’s look at where it might go.
Also read: GBP/USD is stuck near 1.20 as investors seem indecisive
There is a huge triangle/wedge pattern that shows GBP/NZD might be heading lower. Lower highs on a regular basis suggest a new low could be created soon as the market bounces back down from the trend line.
The daily timeframe shows there is no significant support near, where the currency pair could stop. There is actually more than 1,000 pips where GBP/NZD could move.
GBP/NZD daily chart, source: tradingview.com, author’s analysis
For the past few weeks, GBP/NZD has been bouncing from the EMA200 exemplarily while creating lower highs all over the chart. This trend is expected to sustain, possibly bringing the currency pair to at least 1.8782.
This is, however, only a possible move in the short term. If it gains momentum, we could see GBP/NZD heading even lower. If entering a short position, make sure your stoploss goes above the moving average as the market touched it several times in the past when correcting up.
GBP/NZD 4-hour chart, source: tradingview.com, author’s analysis
The support 1.8782 should be the minimal profit target for the next few days, possibly falling even more. If the trend gets broken, consider this signal rejected and actually consider the opposite trade as it could jump to approximately 1.9400 easily. All in all, there is a potential to earn 300 or more pips in both ways.
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