NZDGBP finds buyers at key support level
New Zealand Dollar/British Pound (NZDGBP) Technical Analysis Report for May 22, 2020 | by Techniquant Editorial Team
NZDGBP finished the week 2.26% higher at 0.5013 after gaining 5 pips (0.1%) today on low volume. Trading up to 17 pips lower after the open, the forex pair managed to reverse during the session as bulls took control ending the day above its opening price. Closing within the previous day's range, prices missed to decisively move beyond the prior day's trading range in a lackluster session.
Daily Candlestick Chart (NZDGBP as at May 22, 2020):
Friday's trading range has been 29 pips (0.58%), that's below the last trading month's daily average range of 47 pips. Things look different on the weekly timeframe, where the market's trading range of the last week has been slightly above the market's average weekly trading range. The longer-term, monthly volatility is currently slightly higher than usual for NZDGBP.
Two candlestick patterns are matching today's price action, the Bullish Hikkake Pattern and the Bullish Spinning Top which are both known as bullish patterns. The last time a Bullish Spinning Top showed up on Tuesday, NZDGBP gained 1.27% on the following trading day.
After trading down to 0.4990 earlier during the day, the currency bounced off the key technical support level at 0.5001 (S1). The failure to close below the support could increase that levels importance as support going forward. After having been unable to move lower than 0.4993 in the previous session, the FX pair found buyers again around the same price level today at 0.4990.
Although NZD/GBP is experiencing a short-term uptrend, this might just be a correction, as both the medium and long-term trends are still bearish.
Buying could speed up should prices move above the close-by swing high at 0.5029 where further buy stops might get activated. With prices trading close to this year's high at 0.5117, upside momentum could accelerate should the market be able to break out to new highs for the year. Trading close to March's high at 0.5045 we might see further upside momentum if potential buy stops at the level get triggered.
Among the six market conditions that our pattern recognition engine identified today, the statistics for the Support/Resistance based market condition "Bounced off Technical Support S1" stand out. Its common bullish interpretation has been confirmed for NZD/GBP. Out of 544 times, NZDGBP closed higher 51.84% of the time on the next trading day after the market condition occurred. The optimal exit for swing trading this condition on the long side has been after 10 trading days, showing a win rate of 53.31% with an average market move of 0.21%.