Three weeks ago, GBPNZD was hovering around 1.8900, but the Elliott Wave principle suggested the recovery from 1.8125 was “far from over.” A three-wave pullback was supposed to occur, followed by another rally towards the resistance area between 1.9250 – 1.9630. The chart below, published on January 2nd, explains.
The recovery from 1.8125 looked like a five-wave impulse in wave “a” of (2), labeled i-ii-iii-iv-v. It followed an even larger impulse pattern from 2.0470 to the south, marked as wave (1).
According to the Wave principle, a three-wave correction occurs after every impulse. Since wave “a” was a five-wave pattern, we thought it was just the first phase of a larger a-b-c zigzag correction in wave (2). A pullback in wave “b” and another rally to a new high in wave “c” were supposed to develop before wave (2) ended.
Yesterday, the pair climbed to 1.9299, so now is a good time to take another look.
Wave “b” dragged GBPNZD down to 1.8602 on January 11th. Then, the bulls took the wheel and drew a five-wave impulse in wave “c” up to 1.9299 eleven days later. If this count is correct, the 5-3 wave cycle from the top at 2.0470 is complete. The trend should now resume in the direction of the impulsive sequence.
Wave (2) just touched the 50% Fibonacci level, but the dip from 1.9299 is still too small and cannot confirm the resumption of the downtrend. Traders should wait for a breach of the support line drawn through the lows of waves (1) and “b” of (2) before joining the bears in GBPNZD.
Did you like this analysis? Our Elliott Wave Video Course can teach you how to uncover similar opportunities yourself!
