GBPNZD almost reached 1.8000 a month ago, but the bulls ran out of fuel a fraction of a pip lower. Then the bears took the torch to drag the pair as low as 1.7212 as of today. However, instead of selling after e decline of almost 590 pips, we believe the buyers are ready for another attempt to conquer 1.8000. And this time chances are it is going to be a successful one. The chart below explains why.
According to the Elliott Wave Principle, we can identify the direction of the larger sequence by simply spotting a five-wave impulse on a chart. It looks like that GBPNZD rose in impulsive manner between 1.6704 and 1.7844. But every impulse is followed by a three-wave correction before the trend resumes. And that is where things usually get complicated, because identifying the exact type of the retracement can often be tricky. In this case, GBPNZD seems to have drawn a confusing type of flat correction, because its wave B looks like a triangle. Nevertheless, it is still just a three-wave pattern, which, once over, should give the start of the next positive phase – wave C up. Furthermore, the relative strength index shows a bullish divergence between waves 3 and 5 of (c) of B – another sign that the bears might be ready to give up. Of course, it is never a good idea to try picking bottoms. The better approach would be to wait for the top of wave 4 of (c) of B to be taken out before joining the bulls, because such a breakout will not only serve as a confirmation of the bullish reversal, but it will also provide a concrete stop-loss level right below the bottom of wave 5 of (c) of B. Until then, GBPNZD might continue to decline, but as long as 1.6704 holds, the bulls’ ambitions should not be underestimated.
