GBP/NZD Daily Outlook July 30, 2012



The GBP/NZD pair has been flirting with a serious demand level for some time now. On Friday, we saw the pair finally break through the area, as the 1.95 handle gave way. This signifies to me that the pair is ready to continue the march south that has been going on since May.

The downtrend has been absolutely relentless, and with the exception of the past couple of weeks, it has been almost uninterrupted. The pair has lost 15 handles over the course of the summer, and it looks like we will see more given up.

This makes sense to me as I look around the markets. It isn’t that I think the Pound is so poor, rather that the major central banks, England included, are all trying to ease as fast as possible. This will always bode well for the commodity markets, and in turn the Kiwi. This can be seen by the fact that the EUR/USD and GBP/USD pairs reversed on Friday afternoon, while the AUD/USD and NZD/USD pairs both closed at the session highs.

Broken hammer and levels

The hammer from the Thursday session being broken to the downside is indeed very bearish, and because of this I think the breaking of the obvious support level at the 1.95 handle is even more impressive. This simply shows a serious momentum gain for the sellers, and this should be something more than a “one off” as it were.

The summer action almost suggests a bearish flag of sorts, and if that were the case we could be targeting the 1.80 handle. Granted, I don’t necessarily think that is going to happen, but regardless, it seems we have a very weak market at the moment.

GBPNZD Daily 73012

If we can get below the 1.94 handle, we will have cleared a lot of supportive clusters and this could open the door to the 1.90 rather quickly. This of course should lead to more and more selling as time goes by. Certainly, there are a lot of people wanting back in on this sell off as it simply has a ton of momentum.

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.