We’ve got top tier catalysts all over the place, especially in the U.K., Europe, & New Zealand setting up diverse opportunities in GBP/NZD, EUR/NZD, and EUR/GBP!
GBP/NZD was on a downside tear after seeing resistance around 2.0000 before sellers ran out of steam around 1.9100 in early June. The pair hit the 38% Fibonacci retracement area on the bounce, and like clock work, seller began holding back the bulls over the last few sessions. Not only is resistance forming, but we’re getting a divergence signal between price action and the Stochastic as the former just made a higher ‘high’ while stochastic just formed a lower ‘high.’
This is a pretty good setup for a reversal back to the downside, which all likely hinges on what comes next from the upcoming the quarterly GDP read from New Zealand and the busy economic calendar for the U.K. this week. If the U.K. disappoints and the Kiwis surprise with a better-than-expected read, the downtrend is likely back on the table with the swing low likely to be reach given the daily ATR around 120 – 130 pips.
EUR/NZD has been on the opposite performance spectrum from GBP/NZD as it has been roaring higher since the end of March from around 1.6300. Now trading just under 1.7300, the pair has slowed down a bit in the last week, after breaking a swing high around the 1.7200 handle and now forming a rising wedge as traders take a breather.
Given that the trend is higher, it’s likely the right technical play is for an upside breakout or for another retest and bounce from the broken resistance-turned-support area around 1.7200 to go long. But with a divergence signal again between the stochastic and price action, a downside break of the rising wedge/broken resistance should be kept on the watchlist, especially if this week’s European PMIs or ECB President Mario Draghi comments come in dovish this week.
Last but now least is this simple channel on the one hour time frame of EUR/GBP. The pair has been slowly grinding higher since the end of May, but the action could pick up given the top tier events mentioned before.
With the market already back in the upswing after retesting the bottom of the channel, a good idea for the bulls out there would be to wait for a retest of the bottom of the channel and the 0.8900 major psychological level that the pair has been dancing around over the last week or so. If the market holds there, that could be your cue to take a long position, especially if stochastic signals oversold conditions. But again, with top tier events ahead, we can’t rule out a possible downside break on any surprise news, so don’t forget to set alerts to below the channel so that you don’t miss out!