GBP/NZD is consolidating juuust under a key trend line resistance.
Are we looking at the best place to short before the pair extends its months-long downtrend?
Or is the pair due for an upside breakout? We’re checkin’ out the 4-hour chart, yo!
GBP/NZD Forex Chart by TV
In case you missed it, GBP/NZD started last week by turning higher from its 2.0060 lows and finishing 300 pips higher to its current 2.0360 levels.
The latest FX Weekly Recap has the deets but the TL;DR is that the U.K. printed better-than-expected mid-tier economic data last week while the commodity-related New Zealand dollar was hit by global growth and geopolitical concerns.
Remember that directional biases and volatility conditions in market price are typically driven by fundamentals. If you haven’t yet done your fundie homework on the British pound and the New Zealand dollar, then it’s time to check out the economic calendar and stay updated on daily fundamental news!
Can the pair still extend its upswing?
Take note that GBP/NZD is trading just below the 4-hour chart’s 200 SMA as well as a trend line resistance that hasn’t been broken since August 2023.
And if that’s not enough to make you think twice about buying GBP/NZD, the pair is also consolidating at Q4 2023’s support zone and the 61.8% Fib retracement AND is sporting a bearish divergence in the chart!
If your fundamental work leads you to believe that GBP can keep gaining pips on NZD, then you’ll want to set up orders above the resistance zone that we’ve marked. Clear breakouts above the trend line, for example, could set GBP/NZD up to a move to the 2.0620 or 2.1000 previous areas of interest.
Think GBP/NZD will go back to its downtrend instead?
GBP bears can wait for a break lower from the current consolidation and then a few bearish candlesticks to confirm momentum before betting on further GBP/NZD losses.
In case of another downswing, the 2.0100 psychological handle or 2.0060 previous lows may present legit profit targets.
What do you think? Which way will GBP/NZD go in the next couple of days?