Trade Idea: GBP/NZD Falling Trendline Retest

Didn’t get a chance to participate in the last drop in GBP/NZD because I missed my entry by a few pips. Looks like I get another shot to play the downtrend at a great price thanks to the RBNZ.

GBP/NZD Trade Setup

GBP/NZD 4-Hour Forex Chart

GBP/NZD 4-Hour Forex Chart

As I mentioned above, I tried shorting GBP/NZD two weeks ago on the bounce, but the pair didn’t quite reach 1.7500 to trigger my short orders. Today, I’m still favoring the Kiwi over Sterling, mainly for interest rate and growth differentials, and despite dovish rhetoric from the RBNZ monetary policy meeting this week.  They’re basically staying neutral on interest rates (no hiking or cutting bias) and they still think that the currency is still too high for balanced growth. This sent the Kiwi dropping a couple of handles to reach a couple of technical short arguments (Fibonacci retracement area and the falling trendline in the four hour chart above), which to me is an opportunity to play my fundamental bias towards the New Zealand dollar over the British pound.

That’s what I’m looking to do today and this is another trade I’ll likely hold for a while, so I’m going with a 2x Daily ATR stop.  This should give me enough breathing room to whether the volatility we may get from the upcoming U.K. data in the next week, most notably U.K. inflation and unemployment data. Here’s what I’m doing:

Short GBP/NZD at market (1.7377), stop loss at 1.7775, first target at 1.6975 for an initial 1:1 return-on-risk. I’ll be risking 0.5% of my account on this position and I’ll look to re-assess to potentially reduce my risk and maximize my gain if 1.6925 doesn’t draw in buyers and breaks down further.

As always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.

Risk Disclosure
Pipcrawler’s Q4 2016 Blog Trading Performance

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