GBPNZD has reached our first target at 2.1500 after breaking free from a falling wedge pattern that extends from the September 2015 high. This move represents a 600-pip gain for those who entered at the 2.0850 support level as mentioned on April 28th.
Here is the seven-month wedge that gave way to the recent rally:
So where to next?
While it’s prudent to let the market answer that question by taking a “wait and see” approach, we can always speculate beforehand. And with GBPNZD having carved out some of the best technical levels in the Forex market, we can probably do so with a relatively high degree of accuracy.
Any time you’re dealing with levels this precise, the strategy for entering and exiting the market becomes straightforward. Of course, whether or not the pair behaves is another matter entirely.
If GBPNZD manages to close the day above 2.1500, we could see a push to the next resistance area at 2.2400. Several swing highs and lows define this area, all of which occurred between October of 2015 and January of this year.
Aside from the well defined falling wedge, one reason I’ve been a fan of this pound cross is the sheer distance between key levels. A move from 2.1500 to 2.2400 represents a healthy 900 pips.
On the flip side, if sellers should push prices lower from here, we could see a move back toward the gap that formed on April 27th at 2.1207. If this level fails to produce a substantial bid, a retest of the previously mentioned 2.0850 handle would be in order.
In summary, I remain bullish on GBPNZD as I have been for some time now. Just remember that the RBNZ is on tap early in Wednesday trade between 5 pm EST and 9:10 pm EST, a series of event risk that could be the deciding factor of whether the pair breaks 2.1500 or retreats to a nearby support level.
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