Reversal alert! NZD/JPY and GBP/NZD seem to have bottomed out and are ready to make a long-term rebound, but I’m keeping my eyes peeled for potential pullbacks.
Kiwi bulls have been charging lately, allowing NZD/JPY to surge past its descending trend line resistance that’s been holding since the start of this year.
At the same time, the pair was able to break past its double bottom neckline around the 77.50 minor psychological level. The reversal chart pattern is around 150 pips tall so price could still have a few more pips to climb.
However, the 100 SMA is below the longer-term 200 SMA on the 4-hour chart so there’s still a chance for sellers to regain control of the game. Stochastic is also in the overbought zone, which means that buyers are already feeling exhausted from the rally. A correction to the broken trend line or double bottom neckline could be in the cards before the climb resumes.
Here’s another double bottom breakout, this time on GBP/NZD’s daily time frame. Price successfully cleared its neckline at the 1.7900 handle but looks ready for a correction at the moment.
Applying the Fibonacci retracement tool on the swing low and high on this long-term chart shows that the 50% level coincides with this broken resistance level. A pullback seems due, as stochastic is already indicating overbought conditions and is starting to point down.
The 100 SMA is gearing up for an upward crossover, signaling that more buyers are joining the bandwagon and could keep the uptrend intact. If pound bulls are eager to charge, the pair might not even make it to the 38.2% Fib before resuming the climb. But if a larger correction is underway, the 61.8% Fib near the dynamic support at the moving averages could be the line in the sand.