GBPNZD tests the lower line of the channel down pattern

Today, a quite uncommon setup on the GBPNZD, caught our eye, while scanning the market. The pair is currently on the mid-term lows, which is not a surprise, as NZD is recently one of the strongest currencies among majors…and GBP is not.

GBPNZD is currently forming a channel down formation. The reason why it is uncommon is that it was formed straight after the price escaped from the Head and Shoulders pattern (yellow), which formed throughout October. Usually, after the breakout of the neckline (green), we have a decisive sharp drop. In this case, the price was going lower slowly but surely. This channel down formation is not very steep, it can be even taken as a horizontal rectangle.

Currently, GBPNZD is testing its lower line, which is a promising signal for a potential breakout. The price closing a day below the lower red line would be an amazing signal to go short. On the other hand, price bouncing off this support would be an interesting signal for a short-term long, aiming the upper line of the channel down pattern. In my opinion, a bearish breakout is currently slightly more probable.