GBP/NZD is consolidating in a broadening pattern between 1.7400 and 1.8000 with the potential for a breakout either higher or lower.
Broadening formation patterns are megaphone-shaped with price action widening as it expands outwards rather than contracting as in the case of triangles.
Broadening formations are usually composed of a minimum of five waves, normally annotated a,b,c,d,e.
The current pattern looks to be near completion as it is arguably currently forming the fifth ‘e’ wave down.
Wave ‘e’ is likely to take it to the bottom of the range at 1.7400 and the 50-day MA.
The presence of a broadening formation in this position (as an Elliot Theory broadening ending diagonal) may signal that the correction from the October lows could be near to finishing and the larger downtrend down may be about to start.
The bearish looking MACD suggests the possibility of a bearish break lower and a move below the 1.7200 level confirming a move down to a target at 1.7100, generated by extrapolating the height of the consolidation lower.
Alternatively, it is also possible a break above the highs of the pattern, confirmed by a move above 1.8200 could signal a clear upside breakout from the range, with an initial target at resistance from the R1 monthly pivot at 1.8300.
This evening at 21.45 (GMT) sees the release of the New Zealand Current Account, which if it shows a deficit in Q3 will put pressure on the New Zealand Dollar.
A narrower deficit from the previous -0.95bn Q2 quarter-on-quarter shortfall (-7.38bn year-on-year), would probably lead to upside for NZD (and downside for the GBP/NZD pair).
On Tuesday, December 13 the Current Account Balance for the 3rd quarter will be released at 21.45 (GMT).