British Pound Outlook: GBP/NZD Uptrend Slows as Double Top Reversal Formation Brews
British Pound, New Zealand Dollar, GBP/NZD, Double Top – Analyst Pick
- British Pound may be readying to weaken against the New Zealand Dollar
- A majors-based NZD index showing signs of reversing the key downtrend
- GBP/NZD eyeing bearish Double Top, breakout may hint at further losses
British Pound May Weaken as Zealand Dollar Finds a Turning Point
The British Pounds may be sitting at a peculiar position against the New Zealand Dollar, perhaps one that could spell trouble for GBP/NZD. On the daily chart below is a majors-based New Zealand Dollar index, one that averages the Kiwi Dollar against the US Dollar, Euro, British Pound and Japanese Yen. It can be used to paint an overall picture of the New Zealand Dollar.
The Kiwi index could be on the verge of breaking above a medium-term falling trendline from October 2021. This follows a test of October 2020 lows, which held as support (0.7521 – 0.7554). This is leaving the index facing the February 10th high. Confirming a daily close above the latter may open the door to extending gains towards the 50-day Simple Moving Average.
Majors-Based New Zealand Dollar Index Daily Chart
GBP/NZD Technical Analysis Daily Chart
From a risk-reward perspective, GBP/NZD could have optimal downside potential following a consistent rally since November. The uptrend has come to a pause when focusing on near-term price action. In fact, a bearish Double Top could be brewing. The neckline seems to be sitting at 2.0221 with key resistance above at 2.048 – 2.0534.
A breakout under the neckline could open the door to extending losses, placing the focus on the January 13th low at 1.9939. However, traders should keep an eye out on the 200-period Simple Moving Average. This line could still help maintain the broader upside focus for GBP/NZD as it nears the neckline of the Double Top, holding as support.
Immediate support levels under the neckline appear to be the 61.8% and 78.6% Fibonacci retracements at 2.01266 and 2.0066 respectively. Other levels below the June 13th low that could play out as support include 1.9811 and 1.9706 on the chart below. Otherwise, clearing 2.0534 would overturn the bearish Double Top and open the door for GBP/NZD to resume the uptrend.
--- Written by Daniel Dubrovsky, Strategist for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.