GBP/NZD traded lower during the Asian morning Wednesday, breaking below the support, now turned into resistance barrier of 1.9175. The slide continued during the European day as well, but it was paused at around 1.9115. Overall, the price structure continues to be of lower lows and lower highs below the downside resistance line drawn from the high of May 8th, and thus, we would consider the short-term outlook to be negative.
We would expect the bears to recharge something soon and perhaps pull the trigger for the 1.9060 hurdle, marked near the lows of March 29th and April 1st. If they are not willing to hit the brakes near the at zone, then further declines towards the psychological 1.9000 barrier could be possible. That said, before the next negative leg, the bears may decide to take a small break and allow the rate to correct slightly higher. A break back above 1.9175 could confirm the case and may initiate a recovery towards the crossroads of the 1.9255 level and the aforementioned downside resistance line, from where the sellers could jump back into the action.
Looking at our short-term oscillators, we see that the RSI lies below 30, while the MACD stands below both its zero and trigger lines. These indicators detect negative momentum and corroborate our view for further declines, but the fact that the RSI has ticked up make us cautious of a possible corrective bounce before the next negative leg.
In order start examining the case of a bullish trend reversal, we would like to see a clear recovery above the 1.9290 zone. Such a break would also bring the rate above the downside line drawn from the peak of May 8th, and may initially pave the way towards the 1.9400 territory, defined by the high of May 30th. If that resistance does not hold, then we could see extensions towards the high of the previous day, at around 1.9455.
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