GBPNZD has formed lower highs and lower lows to trade inside a descending channel on its 1-hour chart. Price is currently testing the channel top and could be due for a move back to support next.
The 100 SMA is below the 200 SMA to confirm that the path of least resistance is to the downside or that the selloff is more likely to gain traction than to reverse. However, the gap between the indicators is narrowing to reflect weaker bearish pressure and a potential crossover. Price still seems to be finding resistance at the 200 SMA dynamic inflection point, though.
If the selloff resumes, price could test the 38.2% Fibonacci extension level next as this lines up with the mid-channel area of interest. Stronger selling pressure could take it down to the 50% level at 1.9927 or the 61.8% level that lines up with the swing low. The 78.6% level lines up with the channel support around the 1.9850 minor psychological mark, and the full extension is at 1.9766.
RSI is already on the move down to indicate that selling pressure is present, but the oscillator appears to be pulling back up. Stochastic is also turning higher to confirm that buyers are returning and could push for a break past the channel top. In that case, GBPNZD could start a reversal from its slide.
Sterling has been on strong footing leading up to the December 12 general elections as polls continue to show support for PM Johnson’s Conservative Party. This suggests strong backing for his Brexit plans, possibly allowing the UK to exit the EU by next year’s deadline instead of causing more uncertainty.
Meanwhile, the Kiwi also had a strong run but has been caving to risk aversion and downbeat data from Australia recently. Still, it’s worth noting that economic reports from New Zealand itself have been mostly upbeat.