This pair is approaching the bottom of its long-term triangle, and I think the BOE statement might take it there. But will support hold?
Long GBP/NZD Idea
Price has formed higher lows and lower highs to create a somewhat symmetrical triangle pattern on its daily time frame. The pair already bounced off resistance and looks prime for a test of the bottom around the 1.9150-1.9200 levels.
Stochastic seems to have some room to fall before indicating oversold conditions, so sellers might still be able to take GBP/NZD a tad lower before letting buyers take over.
I’m bullish on the British pound mainly because of strong expectations for a BOE interest rate hike this week. Even though head honcho Carney has warned that a “no deal” Brexit outcome could force them to reevaluate their tightening plans, it seems that a hike is still bound to happen sooner or later.
Meanwhile, the Kiwi may have been able to take advantage of a bit of risk-taking and dollar weakness lately, but trade tensions between the U.S. and China seem far from over. Besides, the RBNZ hasn’t been dropping tightening hints just yet and data hasn’t been all that impressive, so there may be fewer factors supporting this currency.
I haven’t set any entry orders yet since I’m anticipating a lot of volatility during the BOE Super Thursday, as the central bank is due to release its Inflation Report as well. I’m just gonna keep my eyes glued to the triangle support zone to look out for reversal candlesticks or a quick return in bullish pressure at that area.
I’m hoping to be able to jump in a long position around 1.9175 with a stop below the 1.9000 major psychological support. As for my target, I’m aiming for the top of the triangle at 1.9500. Nice potential R:R, don’t you think?
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