GBPNZD SHORTLY BEFORE SHORTENING SELLERS READY!Why is the GBP/NZD pair important to traders?
The GBP/NZD pair brings together two of the world’s most-traded fiat currencies: the British pound and the New Zealand dollar. It shows us how much NZD is needed to buy £1.
Sterling is the fourth most-traded currency worldwide, while the New Zealand dollar is 10th. Among international investors and traders, the GBP/NZD pair is commonly known as the “kiwi”. The origin of this nickname can be traced back to the flightless bird that’s pictured on New Zealand’s $1 coin.
GBP/NZD is an example of a cross-currency pairing. This means these two currencies can be traded directly without being converted into US dollars first. Cross-currency transactions have grown in volume over recent years – driven by international traders who are keen to cut costs and avoid volatility associated with the greenback. The fact that non-USD pairs are now more commonly traded also means spreads have tightened, making it even cheaper to move from one currency to another.
Because GBP/NZD can be prone to volatility and experience significant rate fluctuations, the pair can offer huge potential for speculation. It could also be a great alternative for experienced investors and traders looking to diversify away from forex majors such as GBP/USD, EUR/USD, EUR/GBP and USD/JPY.
GBPNZD currently trading near the falling resistance. The price needs to sustain above 50% fib level. The zone is confluence of falling resistance and and fib level.
We are watching out the key level. A buy position can be taken, If price managed to break above falling resistance and sustained above 50 fib level. While below the mentioned zone only bears will be active.
Tarde your levels accordingly
The post-financial crisis and massive central bank stimulus that followed in developed nations has led to some of the lowest bond yields in history. In a move to find higher returns, cash has moved abroad into economies that offer higher yielding assets. Countries such as New Zealand have benefitted during these times, but with the Fed's move to scale back asset purchases in combination with slower growth in China, the four year trend may be showing signs of fundamental weakness.
History of GBP/NZD
Pound sterling dates all the way back to 775 AD – and evolved into its current form following decimalisation in 1971. GBP represents a significant amount of daily trades around the world.
The New Zealand dollar is far newer and was introduced in 1967 to replace the New Zealand pound. A staggering 27 million banknotes were printed for the changeover, as well as 165 million new coins. Today, NZD has an average daily trading volume of US$68 billion.
According to the historical GBP to NZD graph, the pair hit one of its highest levels in September 2001, when one pound cost NZ$3.6909. But this wasn’t to last – and it paved the way for a downtrend that lasted several years. By August 2011, GBP/NZD had dropped to 1.85. And over the months that followed, with the exception of occasional reverses, the GBP/NZD pairing eased even lower, eventually hitting 1.79 in April 2013.
After bottoming out, the pair’s rate returned to trading at about 2.06 in the second half of 2014 in response to the declining price of dairy products, New Zealand’s main commodity. By September 2015, the exchange rate had soared to 2.4543.
Another turning point in GBP to NZD history was the Brexit referendum in June 2016, when the pair gained strong downside momentum. The UK’s decision to leave the EU was seen by the global community as a negative move for the country’s economy – and the uncertainty led to many investors pulling their money out of the UK at a rapid pace. By October 2016, the exchange rate had dropped to 1.6846.
The reverse in the negative trend dominating the pound to NZ dollar pairing began in July 2017, with rates rising to 2.0377 by October 2018. During 2019, the pairing suffered some volatility once again. Lows of 1.8280 were seen in July that year, while highs of 2.0566 followed in October.
The UK pound to NZ dollar pair started 2020 at 1.9647 and climbed to 2.0958 by 1 April. The coronavirus pandemic has triggered plenty of volatility ever since.
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Factors influencing the GBP/NZD pair
One of the main drivers in the GBP/NZD rate is the economic health of the UK and New Zealand. When getting involved in GBP to NZD trading, it is worth paying attention to a wide range of economic factors including GDP growth, import and export data, employment figures and inflation rates.
Political events can also have a significant influence on the pair. One of the greatest examples is the ongoing turmoil surrounding Brexit that continues to weigh on the pound’s value.
The price of sterling and the New Zealand dollar is also impacted by monetary policies enacted by the Bank of England and the Reserve Bank of New Zealand. For instance, whenever these central banks think inflation is rising too quickly, they will use monetary policy tools in an attempt to bring it under control. Interest rates could rise as a result, which is another factor that traders should consider when analysing the market and the possible future direction of the GBP/NZD pairing.
In addition, the New Zealand dollar is a commodity-based currency. The country’s main trading partners are the US, Australia and China. Therefore, the NZD can face uncertainty if economic growth declines in any of these nations – or if there’s an overall slowdown in global trade. In this scenario, the GBP/NZD rate would go higher on the back of a weaker New Zealand dollar.
How to trade GBP/NZD CFDs
An individual can trade the GBP to NZD currency pair with a regular forex contract in the spot, forwards, or futures market. However, today, one of the easiest and most popular ways that one could trade the GBP/NZD is with contracts for difference, or CFDs.
A contract for difference is a financial contract, typically between a broker and an investor, where one party agrees to pay the other the difference in the value of a security, between the opening and closing of the trade. You are more liquid when you purchase CFDs as you are not tied to the asset: you have merely purchased the underlying contract.
In addition, CFDs give the opportunity to trade GBP/NZD in both directions: you can try to profit from both upward and downward future price movement. You can either hold a long position, speculating that the GBP/NZD’s rate will rise, or a short position, speculating that the rate will fall. This is considered a short-term investment, as CFDs tend to be used within shorter timeframes.
