By: Mike Kulej
The British Pound has been in a prolonged bear market against the commodity currencies. It has made numerous all time lows in relation to the AUD, NZD and CAD. Just as it seems there is no end to the Pound’s selloff, few signs of hope are emerging.
The immediate one can be found on the daily chart of GBP-NZD. Like its peers, this Pound cross recorded an all time low in May, at 2.0330, followed by another one in early November. This time, however, it was not a convincing new extreme. At 2.0292, it barely undercut the old one, setting up the possibility of a double bottom reversal.
Since then the price recovered to a promising degree. The GBP-NZD progressed to 2.1230 in small steps, finally stalling at the 100 SMA. So far, this rally is confirmed by the ADX indicator, which has been showing increased readings in a slow, yet steady manner. In addition, the Momentum indicator behaves almost identically, giving further support to this rally.
One major obstacle remains, the resistance at 2.1280, formed by the most recent high. Only a firm move above that level will validate the double bottom, confirming the longer-term price reversal and opening the way for the GBP-NZD to advance to 2.2250, the next major resistance.