I’ve recently switched to a long GBP bias now that the results of the Scottish referendum are out but, instead of going for a breakout trade, I decided to be a little more patient and wait for a pullback. Looks like patience pays!
In my original GBP/NZD forex trade idea last week, I mentioned that I wanted to catch the upside momentum past the 2.0100 major psychological level. However, with the weekend coming up, I thought that profit-taking could keep the rallies limited and lead to a retracement.
As you can see from the forex chart above, GBP/NZD did retreat to the 2.0000 major psychological level, which lines up with the rising trend line and the 61.8% Fibonacci level. With that, it might hold as a resistance-turned-support zone while GBP/NZD carries on with its climb.
This pair tends to be a volatile one so I decided to set a wide stop of 200 pips and set my first profit target at the previous highs near 2.0300. If fundamentals continue to favor the pound versus the Kiwi in the longer-run, I’m still setting my sights on a higher profit target at the top of the pair’s rising channel on the daily forex time frame.
There are no major reports due from the U.K. this week while New Zealand has its trade balance on tap. Do you think GBP/NZD can keep rallying from here? As always, I’d love to get your feedback on my trade idea.
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