An uptrend appears to be forming on GBPNZD, as a rising trend line can be drawn to connect the recent lows on the 1-hour time frame. However, stochastic has just reached the overbought area and is heading lower after price tested the 2.0100 major psychological resistance.
This could lead to a test of the rising trend line, which lines up with the 38.2% Fibonacci retracement level and the 2.0000 major psychological handle. This acted as resistance in the past and may hold as support for now.
A bounce from this area could push GBPNZD back to its previous highs at 2.0100 or higher if buying momentum picks up. Going long at 2.0000 with a stop below the Fibonacci retracement levels and trend line and aiming for new highs around 2.0200 could yield a high return-on-risk for a short-term trade. Aiming higher while keeping a trailing stop could improve profitability while minimizing exposure.
Data from the UK has been strong recently, supporting a bullish bias for the pound, as the BOE has also showed a couple of policymakers voting to hike rates. However, the Scottish referendum is still a huge event risk for this setup, as Scotland’s independence might lead to political and economic uncertainty for the United Kingdom.
By Kate Curtis from Trader’s Way