GBPNZD could be done with its downtrend as the pair is forming an inverted head and shoulders pattern on the 4-hour time frame. Price has yet to test and break past the neckline around 1.9100 to confirm that a reversal is in the works.

If that happens, price could climb by the same height as the chart pattern or around 500 pips. The 100 SMA is below the 200 SMA, though, so the path of least resistance is still to the downside. In other words, the neckline is likely to hold and allow the selloff to resume.

Stochastic is heading north, though, so price could follow suit while buyers have the upper hand. The oscillator has some room to climb before indicating overbought conditions, so bullish pressure could stay in play for a bit longer. RSI is also heading up without hitting the oversold region, so buyers could be eager to take over.

Sterling is under some downside pressure on account of a stricter tier of lockdown measures in London due to a new strain of the coronavirus spreading. Apart from that, Brexit risks could keep weighing on the UK currency as leaders have yet to finalize a deal.

Some say that another extension might be granted since the pandemic is making the negotiations more complicated than before. However, prolonged uncertainty might still be negative for businesses and consumers in the country.

Meanwhile, New Zealand is doing a fine job of weathering the pandemic as the country was able to secure more than enough doses of the Pfizer vaccine. The country is also keeping coronavirus cases in check, so many expect a return to normal business conditions sooner rather than later.

Risk-taking might also favor the Kiwi as stimulus from the US could be positive for commodities and higher-yielding currencies.