The GBP/NZD pair has continually been one of the Forex markets best kept secrets with an established down trend dating back to 2001. Recent price action has not disappointed trend followers .Since the March high of 2.2525 this year, the pair has steadily moved lower for a maximum decline of over 2800 pips at the June low at 1.9661.
Earlier this morning UK CPI numbers were released at 4.5% (YoY) in line with expectations. See the Economic Calendar linked here. With inflation and growth currently in balance within the UK it makes future monetary action from the BOE remain unlikely. As the Kiwi key interest rate remains relatively attractive at 2.5% we can look for our trend to continue as money follows yield .
Price Action
Taking price in to a H1 chart, we can see price trading in a defined range. Price is currently resting near our resistance line at 2.0150. As well, first support of our range is found at the June 10th low at 1.9661. A break below support would signal a resumption of our trend, extending current all time lows.
Trading Opportunity
My preference is to enter the market to sell the GBP/NZD with the trend near resistance at 2.0150. Limits should be placed by our current low at 1.9661. Stops should be placed at half the distance of our range above 2.0340 giving us a clear 1:2 Risk/Reward ratio.
Alternative scenarios include price breaking resistance for a more substantial retracement against our long term trend.
Walker England contributes to the Instructor Trading Tips articles. To receive more timely notifications on his reports, email instructor@dailyfx.com to be added to the distribution list.
