GBP/NZD has recorded an impressive 2,000 pips rally since early 2017, driven primarily by developments in Brexit and parliamentary elections in UK and the maintenance of a neutral monetary policy by New Zealand.
Each rally encounters sooner or later on a more significant resistance, and for GBP/NZD it appears to be 1.8880-1.8940, where the April maxima coincide with 38.2% abolition of last year’s depreciation and resistance from July 2016. It is worth noting that price moved away from the moving average, so it can try to return to MA surroundings.
What scenarios should we consider in this place? Potential developments are outlined below:
- Bearish correction – after 2,000 pips of growth it is likely that this will be around 1.8380-1.8345 where in April we saw a temporary price stoping. Sales signal at 1.8880 will allow us to aim in this direction (range over 500 pips)
- Overcoming resistance and further increases – but if the price eventually broke the zone of resistance that is blocking it, then the potential re-test from the other side will make us consider longs. Zooming out the graph, it is hard to find significant resistance, apart from the round price levels (1.9000)
Looking at how the price has been set since 2015 – the long-term bearish trend – the first scenario should be far better. We need to wait how the price will now behave and then make a decision.
