close icon

GBPNZD: Reversal in Place, Negative Outlook Intact

Less than two weeks ago, GBPNZD was hovering near 1.9160, following a recovery from as low as 1.8127. After a 10-figure rally in just a month and a half, the bulls were getting more and more confident in their ability to keep pushing the pair higher.

Unfortunately for them, the market was already sending a bearish message in the form of a complete Elliott wave cycle. On January 23rd, we devoted a whole article to that pattern, including the chart below.

Elliott Wave analysis predicts GBPNZD decline

An Elliott Wave cycle consists of two parts. The first part, or phase, is a five-wave impulse, which points in the direction of the larger trend. The second part is a three-wave correction, which moves against the preceding impulse.

In GBPNZD’s case, the recovery from 1.8127, marked as wave (2), followed a five-wave decline from as high as 2.0470, labeled wave (1). According to the theory, it was time for the pair to head south again in wave (3).

However, picking tops is not worth the risk. The price can always rise a little higher before the reversal actually occurs. So we thought “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.” Then this happened:

Bearish Elliott Wave reversal confirmed in GBPNZD

GBPNZD climbed a little further before giving up. 1.9428 turned out to be the exact point of the bears’ return. On Thursday, January 31st, the pair finally breached the support line drawn through the last two lows. The next day, February 1st, the rate dropped to 1.8822.

What Lies Ahead for GBPNZD?

So far, everything has been going according to plan. But instead of accelerating to the south after the breakout, GBPNZD started recovering. The bulls managed to take 150 pips back from the bears and closed last week’s session at 1.8973.

In order to find out what Friday’s leap means, we have to take a look at the wave structure of the decline from 1.9428 to 1.8822.

GBPNZD impulsive Elliott Wave pattern

The 30-minute chart further confirms the long-term bearish outlook. It reveals that the recent weakness has taken the shape of a five-wave impulse. It appears 1.8822 marks the end of wave 1 of (3), whose sub-waves can be labeled (i)-(ii)-(iii)-(iv)-(v).

The sub-waves of wave (iii) are clearly visible, and if we take a closer look, the impulsive structure of waves i) and iii) of (iii) can be seen, as well. Wave (ii) is a running flat correction, while wave (iv) is a triangle.

This pattern means that Friday’s rally to 1.8989 should be part of the corresponding three-wave retracement in wave 2. GBPNZD can be expected to reach 1.9100 in wave 2, but as long as it trades below the starting point of wave 1 at 1.9428, the big picture bearish count remains intact.

Did you like this analysis? Our Elliott Wave Video Course can teach you how to uncover the patterns yourself!



Stay informed with our newsletter

Latest Elliott Wave analysis on different topics delivered to you weekly.

Privacy policy
You may also like:

USDCNH Looks Bearish in the Midst of a Trade War

Less than a month ago USDCNH rose to 6.9621 and it looked like reaching a new multi-year high above 7.0000 was only a matter of time. Unfortunately for the bulls the market chose otherwise. USDCNH fell to 6.8164 on the last day of June. As of this writing, the pair is hovering around 6.8755 following…

Read More »

USDCHF Bears in Charge. Time for a New Key Level

On May 30th USDCHF was trading near 1.0100 in an attempt to recover from a decline from 1.0238 to 1.0009. The bulls had managed to add more than 90 pips and seemed determined to get the job done. Unfortunately for them, there was an Elliott Wave pattern suggesting their efforts were most likely going to…

Read More »

EURUSD Bulls Needed a Catalyst. Mr. Powell Obliged

EURUSD was trading near 1.1170 at the start of last week. The pair was close to levels last seen two years ago and most expected the slide to continue. But then, on June 4th, Fed Chairman Jerome Powell implied the Central Bank is considering interest rate cuts in response to trade issues. By Friday, June…

Read More »

USDCHF Elliott Wave Pattern and a Key Level to Watch

The Swiss franc was among the very few currencies that managed to stand their ground against the U.S dollar in May. USDCHF reached 1.0238 in late-April. The last time the pair traded this high was in January 2017, two and a half years ago. Unfortunately for the bulls, a 230-pip decline dragged the rate back…

Read More »

USDTRY – Is 8.0000 the Bulls’ Ultimate Target?

The U.S. dollar has been on a tear since the Financial crisis, rising against rivals both big and small. One currency that was hit especially hard is the Turkish lira. USDTRY was down to less than 1.1500 in 2008. Ten years later, in August 2018, it slightly breached 7.1500. Political and macroeconomic factors have certainly…

Read More »

USDCNH Before and After Trump’s Tariff Threat

The negotiations between the two biggest economies are not going as well as investors hoped. Stock market indices are down across the board following President Trump’s new China tariff threat. Another side-effect was the sharp rally to over 6.82 in USDCNH. And while Trump’s tweet about China did, indeed, trigger the surge, the actual reason…

Read More »

USDJPY: Analyze, Prepare, then Let the Market Decide

USDJPY reached its higher level so far in 2019 yesterday. The pair climbed to 112.166, extending its recovery from the 109.71 bottom formed last month. But the bulls didn’t always look that confident. Just a week ago, the pair was hovering around 111.15, down from 111.83 five days earlier. Instead of forming an opinion based…

Read More »

More analyses