Trend traders gather!
The GBP/NZD pair could head into a downtrend as it struggles to record fresh September highs near a key resistance area.
Will this extend the pair’s downtrend that has been going on for months?
GBP/NZD currency pair on the 4-hour chart Chart by TradingView
The New Zealand dollar is recovering from traders’ concerns over Chinese data, US growth and global growth, with the New Zealand dollar hitting an all-time low. On the other hand, the British pound is still trading in wide ranges as traders price in mixed UK data and a slight risk aversion in the Eurozone.
Remember that directional biases and volatility in market prices are usually driven by fundamentals. If you haven’t done your homework on the GBP/NZD yet, it’s time to check out the economic calendar and stay up to date with the daily fundamental news!
The GBP/NZD pair, which fell from the 2.1900 level at the end of July, has been trading in a bearish trend. It recently found support at the psychological level of 2.1000 but also reached a ceiling near the 2.1200 levels.
Are we looking for a good place to jump into the GBP/NZD downtrend?
Note that the current resistance area of the pair coincides with the R1 pivot line (2.1194) and the 100 simple moving average on the 4-hour time frame. More importantly, it lies below the top of the descending channel pattern on the chart.
Bearish candles and continued trading below the R1 pivot line expose GBP/NZD for a potential return to the psychological level of 2.1100 where the pivot line is located. If there is bearish momentum, we could even see GBP/NZD return to its lows of 2.1000.
However, if GBP/NZD continues the September rally, we could see a retest of the 2.1300 channel resistance area. This could lead to an upside breakout that could take the pair above the 200-day SMA or the R2 pivot point area.
What do you think? Which direction will the GBP/NZD pair trade in the upcoming trading sessions?