GBP/NZD Daily Outlook Aug. 27, 2012

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By: DailyForex.com

The GBP/NZD pair attempted to break through the 1.95 level on the Friday, but was repelled by the sellers in order to form a shooting star. It should also be noted that this is the 61.8% Fibonacci retracement level from the recent plunge in this market, and as such is a very significant area on the chart.

On Friday, the British pound seem to have had a fairly cost close and it makes sense that perhaps this pair is ready to start falling as well. However, it must be noted that the 1.9350 area looks a bit supportive and as a result we could see a bit of choppiness in the immediate future. Nonetheless, the trend is certainly down, and as such I certainly prefer selling at this point in time.

Because of the potential slowdown in the Chinese economy, commodity currencies are currently getting dinged a bit. With this being said, it is a bit difficult to buy the New Zealand dollar. However, it appears that the British pound may be the driving force in this pair rather than the commodity angle.

Shooting star, 61.8%, 1.95

With this many resistive factors coming together in one spot, it is hard to believe that this market will exactly shoot straight up. However, if we manage to break above the top of the Friday shooting star, this would be a massively bullish signal and have me buying this pair rapidly. In fact, this would not only be a massively bullish signal in the sense that the resistance was broken from Friday, but would also suggest that perhaps the trend was changing.

However, it seems to me that the downtrend is very much still intact, and because of this I am hoping to see the sell signal. Breaking down below the bottom of the Friday session lows would be the initial signal, but if you are a little bit more conservative you may prefer to wait until the 1.9350 area mentioned above is broken down as well.

GBPNZD Daily 82712

If we manage to break down, it would be much of a stretch to think that we would go back down towards the 1.89 handle again. This sets up plenty of room for a move whether you do it immediately, or conservatively. Either way is certainly doable, and is up for personal preference.

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.