NZDGBP plummets, losing 50 pips (-0.98%) within a single day on high volume
New Zealand Dollar/British Pound (NZDGBP) Technical Analysis Report for Jul 31, 2020 | by Techniquant Editorial Team
Moving lower for the 7th day in a row, NZDGBP ended the month -2.67% lower at 0.5066 after tanking 50 pips (-0.98%) today on high volume. This is the biggest single-day loss in over two months. Today's close at 0.5066 marks the lowest recorded closing price since June 1st. The bears were in full control today, moving the market lower throughout the whole session. Closing below Thursday's low at 0.5074, the market confirmed its breakout through the prior session low after trading up to 18 pips below it intraday.
Daily Candlestick Chart (NZDGBP as at Jul 31, 2020):
Friday's trading range has been 63 pips (1.23%), that's far above the last trading month's daily average range of 38 pips. Weekly volatility is also higher, being way above the market's average weekly trading range. The longer-term, monthly volatility is currently higher than usual for NZDGBP.
One bearish candlestick pattern matches today's price action, the Black Candle.
After trading down to 0.5056 earlier during the day, the pair bounced off the key technical support level at 0.5058 (S1). The failure to close below the support might increase that levels significance as support going forward. When prices bounced off a significant support level the last time on June 25th, NZDGBP gained 0.58% on the following trading day.
With another close below the lower Bollinger Band, prices are confirming their strong downward momentum in the short-term. A rally back into the Bollinger Band on the next trading day though could signal a potential change in momentum that might lead to a correction back up towards the center of the Bollinger Bands at 0.5192.
While the FX pair is currently in a short-term downtrend, this could just be a correction, as both the medium and long-term trends are still bullish.
Further selling might move prices lower should the market test June's nearby low at 0.5000.
Among the 11 market conditions that our pattern recognition engine identified today, the statistics for the Price Action based market condition "Strong Down Move" stand out. Its common bearish interpretation has been confirmed for NZD/GBP. Out of 215 times, NZDGBP closed lower 58.14% of the time on the next trading day after the market condition occurred. The optimal exit for swing trading this condition on the short side has been after eight trading days, showing a win rate of 51.16% with an average market move of 0.04%.