In spite of their historical volatility, the GBP-NZD and the GBP-AUD do not get much coverage in the mainstream media. Probably the single biggest reason is wide spreads, which can be as large as 20-30 pips. However, during the past few years, they narrowed down significantly and during the busiest trading hours, we can routinely find them under 10 pips. Still, they are considered illiquid when compared with other Forex instruments and difficult to trade intraday. That said, intermediate term charts offer opportunities that can range in hundreds and even thousand of pips. Currently these markets might be developing such situations.

For the last two months, the GBP-AUD has been in a consolidation, still in historic bear market. This downtrend has lasted for, well, almost forever, since late 2008, with very few corrective rebounds along the way. In mid February, the price made another all time low at 1.4621, but for all practical purposes, it is drifting sideways. The question is, are we dealing with another consolidation, before another leg down, or is it a slow-building rounded bottom. Rounded bottom could be confirmed on a breakout above 1.4900, suggesting a rally to about 1.55 within weeks. The best thing about rounded bottoms is their staying power. Once properly formed, they tend to hold for a long time, meaning that a rally from here should last for weeks or even months.

The GBP-NZD is in almost identical situation to the GBP-AUD. The main difference is that the February low of 1.8629 is not the all time extreme. That took place last year at 1.8542. Otherwise, the picture is the virtually the same, a consolidation within the downtrend or a rounded bottom. For the GBP-NZD, the key resistance is at 1.9130. If the rounded bottom materializes, this pair could certainly rally to 2.0200 or so relatively fast. Of course, the reversal process is not complete, but worth watching.

While on the subject of the Kiwi… The NZD-USD sold off last week, especially on Friday. Because the price closed near the daily extreme, I will be looking for a short-term reversal on Monday, much as I did a week ago in Yen pairs. Using hourly chart, I want to see a bullish reversal candlestick pattern, one that stands out. The target here must be proportionate to average price swings, so it will be on a small side, 25-30 pips. In addition, gaps are always possible, possibly creating trading opportunities. Have a great trading week!

Mike K.