GBP/NZD Currency Pair Will Make One More Rally Before Collapsing, These Charts Show
The pound/New Zealand dollar (GBP/NZD) currency pair looks like it will move up 3,500 to 4,000 pips after it tests the 1.76200 support level. This will offer traders a profitable long opportunity.
The weekly chart above reveals a clear expanding wedge/triangle pattern in play with a trend line breakout over the last two weeks. A trend line breakout must always retest the breakout level. Even though this is a weekly chart, price action is price action, no matter what time frame you're using.
This is not the only reason that bullish momentum is going to happen within the next three weeks. As discussed in this article, the price action on the pound is way too extreme and needs a retracement.
Supply and demand will always be in effect, no matter how big of a news event happens. The pound's move lower against the New Zealand dollar is getting way too overextended, and banks are likely to start looking to buy around the 1.76200 level.
Why the 1.76200 level, you ask? It's because there's a maximum extended bullish butterfly pattern that completes at that level. You can see this pattern highlighted below.
This will be our third "theory" in confluence to buy. It's great when we have massive confluences in price action, because they give us a much better probability of success.
Once the GPB/NZD currency pair finds support around 1.76200, it should make a smooth retracement up into 2.00000-2.05000. It's a very substantial move, and savvy traders should be able to swing trade it all the way up.
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We will most likely be entering this trade once the pair ranges sideways on the four-hour or daily chart, indicating it has found support at 1.76200. We would not buy it as soon as it hit 1.76200.
If this move does happen, once you are up 100 pips, put your stop-loss level at break even and be prepared to fully exit your position at 2.00000-2.05000 because this currency pair's broader trend is still bearish, and it should melt back down to test the bottom trend line of the expanding wedge/triangle. That analysis is below.
That is a significant drop, and it may sound crazy, but we simply read what the price action is telling us. The pair may not work all the way down to parity at 1.0000, but bearish momentum should come in heavily once there is a retest of the trend line.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks or currencies mentioned.
Please do not take this as guaranteed profit. Anything can happen in the forex market, and you can lose money at any time. Trade at your own risk.
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