The GBPNZD is starting to look appealing.
On the surface, the pair looks choppy and indecisive.
And in the short-term, there’s no denying that the GBPNZD isn’t nearly as attractive as other pairs like EURUSD and USDJPY have been of late.
However, if I take a step back, you can see that we have a clearly defined ascending channel that extends from November 2016 low.
Here’s the weekly time frame:
Notice that the recent New Zealand dollar flash crash triggered a retest of the top of that channel near 2.1200.
So does this mean the GBPNZD will move to test channel support immediately?
Not necessarily.
The GBPNZD has a history of moving sideways for weeks or even months at a time.
That was the case throughout most of 2018 and during the first half of 2019.
But there is another pattern that, if broken, could signal a rotation lower from the GBPNZD.
Within the broader ascending channel above, we have a second smaller channel that extends from the 2019 low.
You can see this pattern in the daily chart below.
Given that the pair is coming off that 2.1200 resistance area, any daily close below the smaller ascending channel support could trigger a broader selloff.
At the moment, that channel support comes in between 2.0100 and 2.0200.
A daily close below that level could send GBPNZD lower toward the multi-year channel floor.
That level is more difficult to identify but could be as low as 1.8900.
Just keep in mind that any move of that magnitude would take weeks and probably months to play out.
That’s incredibly important.
The last time the GBPNZD lost more than 1,000 pips, it took thirteen weeks.
And one of those weeks produced a 300-pip uptick.
So, if you are going to sell GBPNZD below that 2.0100 area with a target of 1.8900, you should anticipate a long and bumpy road.
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