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:

Ahead of EURUSD ‘s Disappointing Start to 2021

Overall, 2020 was a good year for EURUSD bulls. Despite the March crash during the coronavirus-related volatility, the pair ended the year up almost 9%. With more stimulus already in the pipeline at the start of 2021, it made sense to expect further devaluation of the dollar against the Euro. Alas, common sense doesn’t always…

Read More »

USDJPY Gains 450 Pips and Counting in Two Months

2020 wasn’t a good year for USDJPY bulls. Starting from 108.63 in January, the pair closed at 103.32 on December 31st, down 4.9% in twelve months. But what the dollar lost against the yen in the entire 2020 it is now close to recouping in less than three months. USDJPY is approaching 108.50 as of…

Read More »

USDTRY Drop Accelerates as Elliott Wave Predicted

The Turkish Lira hit its highest level against the U.S. dollar in six months. The country economic and legal reforms announced last year coupled with tighter monetary policy appear to be giving the desired effect. USDTRY is down 19.3% from its November 2020 high after being in an uptrend since mid-2008. Most analyst, however, are…

Read More »

EURUSD Surges 570 Pips After Fibonacci Encounter

EURUSD is trading at levels last seen in April 2018, when it was on its way down to 1.0636 by March 2020. The pair is now approaching 1.2200, up 14.5% since the COVID-19 selloff nine months ago. But trends don’t move in a straight line. Two months ago, we showed you how Elliott Wave analysis…

Read More »

USDTRY Heads South After Central Bank Decision

Turkey finally took a decisive step towards taming the double-digit inflation, which has been destroying the Lira’s value for years. The country’s central bank lifted the benchmark interest rate to 15%, up 475 basis points from its previous standing. USDTRY fell as low as 7.5031 earlier today, on track for a second consecutive week of…

Read More »

GBPNZD Can Slide to Sub-1.9000 In Coming Weeks

What will EURUSD, USDJPY and USDCAD bring next week? That is the subject of discussion in our next premium analyses due out on Sunday! GBPNZD exceeded 2.0270 in mid-August, but the bulls could not keep the positive momentum. A month later, the pair fell to 1.9055, losing 6% in the process. And just when it…

Read More »

Ahead of EURUSD ‘s 280-pip Drop in September

EURUSD had been on a tear since mid-March when it bottomed out at 1.0636. Nearly six months later, on the first day of September, the pair exceeded the 1.2000 mark. The bulls seemed firmly in control and the Fed’s money printing suggested further losses ahead for the dollar. However, years of experience had taught us…

Read More »

More analyses