NZDGBP finds buyers around 0.5050 for the third day in a row
New Zealand Dollar/British Pound (NZDGBP) Technical Analysis Report for Aug 04, 2020 | by Techniquant Editorial Team
NZDGBP ended Tuesday at 0.5067 gaining 10 pips (0.2%) on low volume. Closing within the previous day's range, prices missed to decisively move beyond the prior day's trading range.
Daily Candlestick Chart (NZDGBP as at Aug 04, 2020):
Tuesday's trading range has been 32 pips (0.63%), that's slightly below the last trading month's daily average range of 38 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 higher than usual for NZDGBP.
Even with a weak opening the market managed to close above the previous day's open and close, forming a bullish Engulfing Candle.
Buyers managed to take out the key technical resistance level at 0.5058 (now S1), which is likely to act as support going forward. The FX pair found buyers again today around 0.5050 for the third trading day in a row after having found demand at 0.5053 in the prior session and at 0.5056 two days ago.
Crossing above the lower Bollinger Band, prices have lost at least some of their downward momentum in the short-term and might now be heading back up towards the mean of the Bollinger Bands at 0.5175. The last time this happened on March 10th, NZDGBP gained 0.70% on the following trading day.
Although the 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.
Trading close to June's low at 0.5000 we might see further downside momentum if potential sell stops at the level get activated.
Among the five market conditions that our pattern recognition engine identified today, the statistics for the Support/Resistance based market condition "Price broke through Technical Resistance R1" stand out. While it is usually interpreted as bullish, it has actually shown to be bearish for NZD/GBP. Out of 351 times, NZDGBP closed lower 51.57% 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 five trading days, showing a win rate of 52.14% with an average market move of 0.00%.