I’m looking at a simple trend play this week with this potential long forex setup on GBP/NZD. The pair is currently testing the channel support on its 1-hour forex chart and may be due for a bounce soon.
I’m also seeing a small bullish divergence on the same time frame, as price made higher lows while stochastic drew lower lows. The oscillator is already starting to make its way out of the oversold zone so I think price might be headed north, too.
In terms of fundamentals, I think the odds favor the British pound on this one since the U.K. has recently printed stronger-than-expected economic data, supporting the BOE’s view that a recovery is taking place. On the flip side, the Kiwi could undergo more bearish pressure since the RBNZ seems to be setting the stage for an interest rate cut by implementing curbs on its housing market.
I’ll be watching out for the release of the second estimate of the U.K. GDP today though, ready to exit early if necessary. Analysts are expecting to see an upward revision from 0.3% to 0.4%, which could allow the pound to extend its gains.
I’ve already gone long with my half my usual position size at market and I plan to add on a break past the mid-channel area of interest. This area lines up with the potential neckline of this double bottom pattern forming right around the channel support. I’ll be aiming for the channel resistance at 2.1600 with a stop loss below the bottom of the channel at 2.1050.
Here are the details:
Long GBP/NZD at market (2.1200) at 0.5% risk and at 2.1450 at another 0.5% risk, stop loss at 2.1050, profit target at 2.1600. I’ll be adjusting my initial stop to entry once the pair moves past the middle of the channel. Better take a look at our risk disclosure if you’re planning on joining me!
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