GBP/NZD Daily Outlook July 3, 2012



GBP/NZD is a currency pair that many traders overlook, which is too bad as both currencies are majors. The spreads on this particular pair aren't bad - typically around seven pips and the moves can be very deliberate and straightforward.

Recently, the British pound has been beaten up against many currencies. In this particular pair, you have the British pound - a heavily industrialized and advanced economy, paired up with a currency that is highly sensitive to the commodities market. While many of you would be used to seeing the Pound gain in a "risk on environment", this pair actually moves in the opposite direction as the Kiwi dollar is so sensitive to global risk appetite.

Looking at the chart, you can see that the moves are quite deliberate and steady. For the trader who's willing to hang onto a position for more than a few days, this can be a great pair to trade. Also, you have to keep in mind that there have been a lot of problems in the United Kingdom lately, and this makes sense that the pair would fall in favor of the New Zealand dollar.

1.95 looks supportive

The candle for Monday was a hammer, which in and of itself is a relatively bullish signal, but the fact that it was on the 1.95 level is even more interesting. As you look to the left, you can see a yellow box on the chart that was massive resistance previously. This resistance area should be supportive at this point in time, and the fact that the British pound did fairly well against the US dollar on Monday suggest that perhaps the days of beating the Pound mercilessly may be coming to an end.

GBPNZD Daily 7312

While I don't know necessarily that this is going to be the move of a lifetime, this certainly looks like it setting up for a nice 300 pip run or so. Because of the candle formation and more importantly the location, I am willing to take a flyer in this pair and buy it on a break above the Monday highs. I would be willing to take profit at 1.9855 or so, even though it is somewhat countertrend. It should be said however, if that level gives way - this pair could rocket straight back to the 2.00 level and beyond.

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.