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A few low-tier reports are due from the U.K. economy in the London session, so I’m hoping for some pullback action on this sterling pair.

Risk aversion could stay in play over the next few hours as tighter border restrictions and geopolitical tensions made it back to the headlines.

Major Forex Pairs Price Performance from MarketMilk
Major Forex Pairs Price Performance from MarketMilk

Before we check out the setup, you might want to read the top news during today’s Asian session trading.

Fresh Market Headlines & Economic Data:

Upcoming Potential Catalysts on the Economic Calendar:

  • German import prices at 6:00 am GMT
  • Swiss Credit Suisse economic expectations index at 8:00 am GMT
  • U.K. mortgage approvals and net lending to individuals data at 8:30 am GMT

What to Watch: GBP/NZD

GBP/NZD 1-hour Forex Chart
GBP/NZD 1-hour Forex Chart

Higher-yielding currencies are under some downside pressure lately as the market focus is returning to the surge in coronavirus cases.

Sterling, however, managed to draw some support from upbeat medium-tier data. Will the next batch of U.K. figures keep it afloat? Or is a pullback due first?

Stochastic is heading south from the overbought zone, so price could follow suit as sellers take the upper hand. Using the Fib retracement tool on the latest rally shows that the 38.2-50% levels span an area of interest or former resistance that could hold as support.

Also, the 100 SMA is above the 200 SMA to confirm that bullish momentum could pick up. After all, GBP/NZD recently broke above the neckline of a double bottom pattern, so a rally of the same height as the reversal pattern (300 pips) could follow.

This means that the pair could recover to the swing high and beyond, especially if risk-off flows stay in play for the London session. Just make sure you look at the average GBP/NZD volatility when setting your entries and exits!