Trade Recommendation: GBP/NZD
The British Pound/New Zealand Dollar pair (GBP/NZD) has been in a downtrend since May 2009 when it broke below support of 2.60. This triggered the double top reversal pattern on the monthly chart. The breakout from the bearish pattern inspired a selling frenzy. The pair then generated a series of lower highs and lower lows until it showed some signs of stability at 1.62266 in October 2016. In over seven years, the British Pound lost more than 60% of its value against the New Zealand Dollar.
At this price level, GBP/NZD flashed reversal signals. First, the monthly candle was a hammer. This suggested the presence of buyers below 1.70. Second, the pair was in extreme oversold conditions on the weekly chart. Lastly, there was an exponential increase in volume when the pair dropped to this level.
With the pair showing bullish signs, more and more bottom pickers entered the buying scene. GBP/NZD rallied to as high as 1.89631 in May 2017. While bears managed to resist the advance, bulls eventually claimed the territory.
Technical analysis reveal that the British Pound/New Zealand Dollar pair has taken out resistance of 1.90. This triggered the cup and handle reversal structure on the weekly chart. The breakout was affirmed by a strong rally to 1.98396 in December 2017. The market has been consolidating since. This is your chance to buy the breakout.
The strategy is to buy as close to 1.90 as possible. As long as bulls stay above this support, they have all the momentum they need to rally to our target of 2.10.
The process may take more than three months.
Weekly Chart of British Pound/New Zealand Dollar on OANDA
As of this writing, the British Pound/New Zealand Dollar pair (GBP/NZD) is trading at 1.91059 on OANDA.
Summary of Strategy
Buy: As close to 1.90 as possible.
Stop: Close below 1.89.
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