The shared currency faces a decision point this week. If price bounces from where it is now, we’re almost certainly in a prolonged consolidation before another move higher (represented by the blue arrows.) However, price has been hugging support (both lower grey trendlines) for several days now, a hint that it wants to go lower.
If price remains depressed by Wednesday this week, I would look for downside in the pair. If, on the other hand, we see the buyers step in by that time, a move back to 1.2500 seems most likely.
Cable finds itself coiling up. We’re seeing lower highs squashed into higher lows and price is forming a wedge or triangle. Given the prevailing trend into this pattern, we have to favour the long side still.
Look for a break higher, and a retest, targeting 1.4260.
I mentioned the AUDJPY some weeks back, focussing on the very impressive pin-bar we saw, hinting at a move higher – a move that clearly hasn’t happened.
There are two rules that I always apply to potential reversal signals, and those rules kept me out of a loser. They are:
If a reversal signal is going to come good, price should actually start reversing smartly. After two days of doing nothing, I wasn’t interested in this anymore.
Price never traded higher than the pin-bar before falling. I always use a stop order above or below my signal candle. Price needs to be “pushing” in my direction for me to get in.
I think GBPNZD is going to run out of sellers as it gets squeezed lower, resulting in a violent pop upwards in price. We may see that breakout this week, or price might coil lower for a few more weeks. Either scenario is OK – the longer price coils for, the bigger and more violent the breakout when it comes. As always, wait for the retest.
I think a target up near 1.98 isn’t unreasonable and would mean a 600 pip long on offer.
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Portfolio Manager, Unum Capital