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GBP/NZD Wedges into Triangle for Possible Breakout

GBP/NZD Wedges into Triangle for Possible Breakout

2011-12-20 20:10:00
James Stanley, Strategist
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GBP/NZD Wedges into Triangle for Possible Breakout

By James Stanley

After staging the beginning of what would become a methodical upside trend in August of this year, the GBP/NZD currency pair has run into a wall of indecision; promulgated by the triangle forming on the Daily and 4 hour charts.

New_document_2_body_Picture_1.png, GBP/NZD Wedges into Triangle for Possible Breakout

Created with Marketscope/Trading Station 2

Traders need not look any further than their calendars to imagine why this may be happening.

The lower liquidity/volatility that can come during holiday weeks may lead into similar situations in which prices have a tendency to populate within a tightening range. Traders unsure of directional bias or potential trend direction may avoid bidding the trend higher; whereas traders wishing to sell short may be daunted by the veracity of the up-trend that has ensued since the beginning of August.

Without news circulating in the environment motivating traders to move prices beyond support and resistance, prices can populate in a range-bound fashion for an extended period of time. This may be frustrating for the traders attempting to trade each side of the range, but it may also present opportunity to those willing to be patient.

The Triangle setup can be an excellent situation to look for breakout trades, in which price may continue to run (either up or down) after the triangle is broken.

For anyone wishing on more information on playing Symmetrical Triangle Patterns, this article from Walker England can certainly help:

How to Trade Symmetrical Triangles

--- Written by James B. Stanley

To contact James Stanley, please email Instructor@DailyFX.Com. You can follow James on Twitter @JStanleyFX.

To be added to James’ distribution list, please send an email with the subject line “Notification,” to Instructor@DailyFX.com.

Additional Resources:

Support and Resistance – On-Demand Video Course

How to Trade a Breakout Strategy on EUR/USD

Fibonacci Retracements: How to Trade Fibs in Forex

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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