This week we are going to look at the GBPNZD on the daily timeframe. This is one of the most volatile pairs in the forex markets. It is quite clear when we look left, prices have been on a very steep downtrend. We can confirm the steepness from the gradient of the trend. Price later reached a near-term support then rallied up momentarily. Following the rally, there was a consolidation in form of a chart pattern. The pattern is known as a head and shoulder pattern as illustrated on the chart.
Consolidation is an indication of indecision between the buyers and sellers. Price was supported twice on the neckline of the pattern but eventually broke and closed a few pips below the neckline. At this point, we will hold on for prices to confirm the breakout from the neckline, as we know it is possible for prices to gain some bullish momentum and rally back up to the level of the left shoulder. Therefore to confirm bear power a pullback/retest is important to verify that the neckline will resist price from rallying back up past the neckline and push downwards.