FX Market Analysis – GBPNZD October ’19

*Technical and fundamental analysis of the GBP vs NZD FX currency pair*

Happy Monday to you all. I hope you had a good weekend. I am starting the week with a market analysis blog post to show you where I think the GBPNZD FX currency pair will go over the next few days and weeks.

Before I go in to the details of the analysis, I would once again like to mention that all my analysis takes place on the TradingView platform and it is the only charting software I use for my analysis. You can go to their website by clicking on the link below.

https://tradingview.go2cloud.org/SH3bP

I have also posted this GBPNZD market analysis on my TradingView profile for you to be able to track the progress of this trade live. You can view it by clicking on the link or image below.

Fundamental Analysis:

Let’s start with my fundamental views on how the British pound might react over the following few weeks.

Firstly, I imagine that it is going to be fairly volatile leading up to the 31st October Brexit “deadline”. There is still a lot of uncertainty in the market and in my opinion, we have achieved almost nothing since Brexit was announced back in 2016. However, I believe it is this uncertainty that will have an overall negative effect on the value of the Pound as we head towards the end of the month.

Without progress being made, those holding the currency will look to off load to avoid any risk of a political shock costing them money. Therefore sellers will likely push the value of the point lower over the next few weeks.

Technical Analysis:

GBPNZD 4 hour timeframe chart
(ideal short position entry)

The chart above is the basis of my analysis and the timeframe I will use to monitor and manage this trade. The 4hr chart shows a clear down trend beginning to form which is counter to the recent bullish move the GBPNZD pair made over the last 2 months.

A lower high and lower low has now been made with 3 clear rejections of the upper bearish trendline. As I have said in previous blog posts, it takes 2 points to draw a trendline but 3 to confirm it and therefore this trendline is now confirmed. Price is crossing below the 4hr 50ema for the first time in a while so this is also a good sing that selling pressure exists in this zone and that the bullish trend has definitely weakened.

I have applied the fibonacci retracement tool to the previous bearish wave and I can see that the 0.786 retracement level overlaps the trendline nicely in the 1.96420 area. This is where I will look to enter short.

Let’s look at the 1hr timeframe chart next and I will show you an extra confluence that predicts a reversal in this area.

GBPNZD 1 hour timeframe chart
(counter trend fibonacci extension levels)

What I have done is zoom in on the current bullish counter trend that is occurring on the 1hr timeframe chart. I have then applied the fibonacci retracement tool to the last wave to predict where the extension (not retracement) levels fall. I have mentioned fib extensions in previous blog posts and they can be used effectively to predict where profit targets and the next lower lows/higher highs of the current trend might appear.

In this case, the -0.618 fibonacci extension of the current 1hr bullish trend lies almost exactly where the 4hr bearish trend 0.786 fibonacci retracement level is. This means that there is strong correlation between where the current bullish counter trend will end and where the prevailing bearish trend will continue.

Clever right?! Confusing?… probably.

What this does do is provide that extra level of accuracy and another point of analysis that could act as resistance and make price reverse at that area. If the buyers of this current 1hr trend take profits at that level then they will be selling to close their long orders and this will push price down. This is simple financial market movements.

And finally, the larger picture.

GBPNZD 4 hour timeframe chart
(line chart)

I have used the line chart in this example because it is easier for me to draw the trendline. I just joined the lower 2 points of the recent bullish move and as you can see, price has now broken this trendline.

Trendlines are one of the most subjective parts of technical analysis and everyone draws them differently. I normally join the wick lows of candles unless it is difficult to do so because of volatility wicks etc. For the purpose of this chart and the GBPNZD chart, I think the line chart is best for this trendline.

The bigger picture shows that there is a strong potential for price to pullback from this level. Therefore being on side with the bearish move would be beneficial and that is why I am looking to enter short positions. I have marked on my larger profit targets and if price keeps making bearish waves on the 4hr timeframe chart then I will try and ride the bearish price action down to the blue target profit lines I have shown on the chart above.

Contingency Plan:

There is a possibility that my sell order is not going to be triggered. This is okay as my back up plan is to then wait for the 1hr bullish trendline support to be broken and I will then short on the next 1hr lower high. This set up is shown on the chart below.

GBPNZD 1 hour timeframe chart
(contingency plan short entry)

As always, patience is key. I will not enter unless my sell order is triggered or price action begins to show my contingency plan entry set up. Until then I am just waiting and watching this FX currency pair.

Thanks for reading! Please don’t forget to LIKE, SHARE and FOLLOW my blog to stay up to date with the latest blog posts and market analysis.

DISCLAIMER: None of the information posted on this site is to be considered investment/financial advice. Trading is high risk and you should only trade with money you can afford to lose.

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