Restructuring GBP Ahead of the NFP in the Forex Market

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GBPNZD Technical Strategy

Following our GBPJPY trading strategy, we have decided to attempt a long trade in one of GBP pairs and crosses ahead of the UK referendum that is due in June, 2016.

The only currency pair that an entry may still be possible is GBPNZD. For the benefit of traders that are relatively new to GBPNZD the FX cross is capable of trading +200 pips per day. It is a very volatile cross so precision is required to ensure a minimal drawdown will be achieved. The main entry is derived from the monthly chart.

GBPNZD Monthly Chart

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GBPNZD Monthly Chart 28/03/16

GBPNZD Monthly Chart 28/03/16

GBPNZD began its modest recovery following a break above the reversed Head-And-Shoulders (H&S) neckline. The corrective weakness that began in September 2015 has reached the former neckline of the reversed H&S at 2.0985, which was able to sustain the price and prevent a deeper retracement. By the book, a monthly close is required while the protective stop must be layered beneath 2.0590, which is exceeding +700 pips.  We do not employ such stops regardless of the potential Return on Investment (ROI). In addition, the monthly close falls at the end of Thursday’s session, which is before the US Non-Farm Payrolls (NFP).

In order to join the potential uptrend we must decide whether we wish to opt for an intraday stop or a daily stop.

GBPNZD Daily Chart

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GBPNZD Daily Chart 28/03/16

GBPNZD Daily Chart 28/03/16

The price may face a possible resistance level as seen from the daily chart. What remains to be answered is whether the rebound off the support is strong enough to pierce the resistance or a re-test of 2.0985 will be seen before the corrective gains will take place. If we were to use the daily chart the protective stop must be layered beneath 2.0985 in order to absorb a possible retracement should the price fail to tackle the resistance level.

GBPNZD 4hr Chart

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GBPNZD 4hr Chart 28/03/16

GBPNZD 4hr Chart 28/03/16

The price was able to close above 2.1158, which may pave the way for further gains in GBPNZD. The desired location for the protective stop will be below 2.1095 in order to absorb any undesired spikes that are often seen in the cross. While the intraday stop may appear has a better alternative, if the anticipated gains do not materialize within the next 24 hours the risk of the market triggering the protective stop loss order are much higher.

We cannot consider a 4hr entry until the daily close. The target of the long trade would be above 2.1538 but the exact level greatly depends on whether we employ the daily or 4hr chart. It is a very complex decision to make. The trade alert should be sent via email after the daily close. We will wait for the spread to stabilize before issuing the trade alert.

GBPNZD Trade Alert Details

The spread is not completely stable but it is a spread we willing to incur. We have decided to opt for an intraday stop. There is an element of risk in doing so that we must highlight but it is a risk we are willing to endure. We cannot rule out a re-test of 2.1095, which is why the protective stop loss order will be placed below the support.

The optimal scenario will be a PBOC intervention that are likely to lift GBPNZD by over +200 pips but unfortunately the PBOC actions are difficult to be predicted.

Please click on the chart to enlarge:

GBPNZD 4hr Chart II 28/03/16

GBPNZD 4hr Chart II 28/03/16

GBPNZD long at market price (2.1193)
Take profit: 2.1680
Protective stop:2.1007
Risk Ratio (RR): 1 : 2.6 (approx.)
Estimated duration: 14 days

29/03/16 UPDATE: GBPNZD has re-tested 2.1095 before reversing higher as stated in the strategy.

GBPNZD 4hr Chart

Please click on the chart to enlarge:

GBPNZD 4hr Chart 29/03/16

GBPNZD 4hr Chart 29/03/16

No action is taken.

01/04/16 UPDATE: The rebound off the support reached our entry, however, the Bank of England (BOE) warning of the UK exiting the EU left GBP vulnerable. The moderate rebound in commodities lead to strong NZD, which reflected in heavy GBPNZD selling, triggering the protective stop loss order of the long trade,

Restructuring GBP Ahead of the NFP in the Forex Market
As GBPNZD trading strategy is no longer applicable this page can now be accessed by all traders. Open trades are restricted to members only. We have been providing trade alerts in the Forex market since May 2014.
Restructuring GBP Ahead of the NFP in the Forex Market

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Restructuring GBP Ahead of the NFP in the Forex Market

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Restructuring GBP Ahead of the NFP in the Forex Market