How to Trade the GBPNZD Currency Pair
In February 2022, the UK and New Zealand signed a comprehensive trade deal that will remove trade barriers on a wide range of UK goods and services. Trade between the two countries was worth more than £2.3 billion in 2020 and is now expected to grow by 60%.
The deal also provides accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) which is a free trade area in the Asia-Pacific region with a joint GDP of £8.4 trillion – making the GBP NZD exchange rate a very interesting currency pair to trade on.
In this ‘How to Trade the GBPNZD Currency Pair’ article, you will learn how to analyse the GBPNZD chart and find GBPNZD ideas for trading, a long term GBP/NZD forecast and how to access cutting edge trading tools to identify the GBPNZD correlation and sentiment.
Table of Contents
How does the GBP NZD Exchange Rate work?
GBPNZD is the currency pair symbol for how the British pound is trading against the New Zealand dollar. The first currency in a pair is referred to as the ‘base currency’ while the second currency in the pair is known as the ‘terms currency.’
Let's say the GBPNZD exchange rate was trading at 1.9420. This means that 1 British pound will buy you 1.9420 New Zealand dollars. Exchange rates are usually quoted with two prices, as shown below.
The quote in the left column is referred to as the bid price. The quote in the right column is referred to as the ask price. These figures will constantly change up and down when the market is open.
- If you believe the GBPNZD exchange rate will rise in value and want to buy (or go long) on
the currency pair, you buy at the current ask price.
- If you believe the GBPNZD exchange rate will fall in value and want to sell (or short sell)
on the currency pair, you sell at the current bid price.
Financial products such as contracts for difference (CFDs), allow you to speculate on the price direction of a currency pair. This means you could potentially profit from rising and falling markets. It is also the same concept when learning How to Trade GBPUSD, How to Start GBP/JPY Investing
and How to Trade GBPAUD.
GBPNZD Trading Costs
In an exchange rate quote, you may notice there is a difference between the bid and ask price. The difference is referred to as the spread and is just one cost of trading.
Using the currency quote screenshot above, the spread of GBPNZD is 0.00072 (1.94259 - 1.94187). As the minimum contract size for the currency pair is 0.0001, this means the spread is 7.2 pips. How does this affect forex traders?
Let’s say you believed the currency pair will rise in value. You initiate a long, or buy, position at the ask price. The market would now need to move at least 7.2 pips higher for you to break even. This is the point where the currency bid price (the price you sell at) is at the same price level as you bought
at (the ask price at the time of buying).
At the time of writing, the current average daily trading range of GBPNZD is around 200 pips per day.
Did you know that with Admirals you can access Zero trading accounts? These accounts offer institutional grade spreads from just 0.1 pips with competitive commissions. You can learn more on the ‘Types of Trading Accounts’ page or by opening a FREE demo trading account today.
GBPNZD Analysis – Fundamental & Technical
When making GBPNZD buy or sell trading decisions there are a variety of analysis techniques used by traders. These typically come in the form of fundamental analysis and technical analysis.
Let’s have a look at the key indicators to take into consideration when performing a GBPNZD analysis.
GBPNZD Analysis Using Fundamentals
Fundamental analysis is the process of analysing economic data. This could involve analysing GBPNZD news that focuses on interest rates, employment figures, consumer confidence, retail sales and so on.
Analysing GBPNZD news can be categorised through the following sections:
1. The UK and New Zealand Economy.
The strength or weakness of an economy can have a huge impact on the direction of a currency.
- When an economy is performing well, it’s likely that international investors will move more capital into the economy to capitalise on any growth.
- When an economy is performing badly, investors may consider moving their capital out of that economy and invest in a better economy.
While the UK economy is much bigger than the New Zealand economy, investors have access to move their capital freely around the world. This enables currency traders to be able to also capitalise on where that capital is moving into and out of.
2. The Bank of England (BOE) and the Reserve Bank of New Zealand (RBNZ).
Every central bank has a government-led mandate to keep inflation at a certain level. Central banks are given the power to adjust monetary policy such as interest rates to try and meet this inflation target. The decisions from the BOE or RBNZ cut or increase interest rates heavily influence the direction of
- In normal economic conditions (unlike a pandemic for example), the anticipation of rising interest rates can lead to a rise in a currency as international investors park their capital into the economy to capitalise on the higher interest rate.
- In normal economic conditions, the anticipation of falling interest rates can lead to a fall in a currency as international investors move their capital out of the economy and park it into a better economy where they can get a better return.
- When foreign exchange trends develop due to money market fund managers using interest rate differential strategies, these are referred to as the ‘Carry Trade.’
It is important to note that there are some situations where the opposite scenario could happen. For example, at the start of 2022, the Bank of England increased interest rates to a 13-year high. While the British pound (GBP) did initially find some strength the currency fell over many weeks.
This is because investors feared stagflation. This is a situation where inflation is high, causing the central banks to increase interest rates, but the economy is slowing. The low economic growth was attributed to a variety of factors such as the UK cost of living crisis, the aftermath of the pandemic, Brexit and other factors.
3. Government and Political Actions
Government policies can also have a big impact on the direction of a currency. For example, the 2016 Brexit referendum and the cost of living crisis in early 2022 and some factors that influenced the weakness seen in the British pound.
In New Zealand, the economy is heavily affected by tourism and dairy production as they are the world’s largest exporter of whole milk powder. Therefore, government lockdowns during the pandemic which banned tourists and shut down farms had a huge influence on the New Zealand dollar weakening.
You can stay up to date with the latest news and analysis by registering for your FREE place on the Admirals live market webinars.
GBPNZD Technical Analysis Tools
One of the most popular ways in making GBPNZD buy or sell decisions is to use technical analysis. This is the study of technical indicators and chart patterns to analyse the market for potential trading opportunities.
The chart above shows the 2 hour price action of GBPNZD. It includes technical indicators from the MetaTrader 5 Supreme Edition platform which is a free upgrade to MetaTrader provided by Admirals.
The indicators include the Admirals Mini Terminal on the right side, Donchian Channels on the chart, depth of market data and a Symbol Info indicator.
You can also access GBPNZD sentiment indicators and GBPNZD correlation indicators from the Supreme Edition plugin as discussed in the next few sections.
While indicators are a popular method in analysing a GBPNZD chart, many traders will also analyse price action trading patterns. This is the study of each bar or candle on the chart and the clues they provide of where the market could move next.
You can learn more about this in the Price Action Trading Strategies To Know article.
Trading GBPNZD Sentiment
Many traders will try to trade currency sentiment. This is effectively trading the views or opinions of other traders. Understanding how the rest of the market is positioned can be useful in knowing who is in control of a market – the buyers or sellers.
Once you download the Admirals MetaTrader Supreme Edition plugin, you can access the Admirals Sentiment indicator.
The screenshot above taken from the Admirals MetaTrader 5 Supreme Edition platform shows the GBPNZD sentiment at the time of writing. This shows that – at the time of writing – there were more Admirals clients long on GBPNZD than short on the currency.
However, there is not a huge difference between the long holder and short holders as only 53% are long. This could be suggesting that the currency pair is more range based as there is almost an equal number of traders long and short.
When sentiment readings get above 75% then there is more statistical evidence to suggest more people are trading in that direction, therefore confirming an overall strong bias of the trend.
Trading GBPNZD Correlation
Learning the current GBPNZD correlation to other markets can be very useful when thinking about the risk management of your portfolio. As currencies come in pairs, there can be times when this has a high level of correlation to another pair. If you are trading markets that are highly correlated then it is possible all of your trades could win or all of them could lose. As trading is always about protecting the downside risk, this exposure of
positions could lead to large losses.
With the Admirals MetaTrader Supreme Edition plugin you can access GBPNZD correlation indicators.
The screenshot above shows the GBPNZD correlation to other currency pairs at the time of writing.
- Red box = strong correlation
- Orange box = medium correlation
- Blue box = weak correlation
- Green box = no correlation
In the GBPNZD correlation matrix window, it shows that – at the time of writing – GBPNZD was highly correlated to EURNZD with a +81 correlation. However, perhaps more interestingly GBPNZD is much more correlated to GBPAUD with a +90 correlation.
Therefore, trading GBPNZD, GBPAUD and EURNZD could be too much exposure as they were all heavily correlated at that time.
The correlation matrix also shows that there is very little correlation between GBPNZD and AUDNZD. This means that even though they are two NZD pairs, there is little correlation between them. Risk management tools such as this correlation matrix can be useful in protecting your trading account.
You can upgrade your MetaTrader trading platform with the Admirals Supreme Edition plugin completely FREE. This will allow you access to the sentiment, correlation and many other technical indicators.
Long Term GBP NZD Exchange Rate Forecast
During the first quarter of 2022, GBPNZD was trading at long term support levels. Analysing GBPNZD support and resistance levels can help to provide more information regarding who is in control of the market and where the market may move next.
The lower, horizontal support line is of most interest as the price has turned higher on multiple occasions in 2018 and 2019. During the UK government's 'mini-budget' news announcement in September 2022, the British pound crashed lower into this horizontal support line. However, the huge rally that ensued afterwards on the weekly price candle shown below is interesting if buyers can continue the moment.
As we can see from the chart above, analysing GBPNZD support and resistance levels can be useful in helping to identify turning points in the market. Currently, the price is in between the two big levels of support and resistance.
However, traders can view the lower timeframes such as the 4 hour chart or 1 hour chart, where more support and resistance levels can be found. Typically, traders would use these levels and other technical indicators or price action patterns before making a decision.
If you’re interested in learning more on how to trade the currency market using expert tools then register for your FREE place on the Forex 101 Course!
Why Trade GBPNZD with Admirals?
If you trade GBPNZD with Admirals, you can:
✔️ Trade with a regulated broker authorised by the UK Financial Conduct Authority, Cyprus Securities and Exchange Commission, the Jordan Securities Commission and many others.
✔️ Access trading spreads as low as 0 pips with the Zero.MT4 and Zero.MT5 trading accounts.
✔️ Trade Forex, indices and commodity CFDs with competitive spreads and swaps.
✔️ Use the MetaTrader platform on desktop, web or mobile and upgrade to the MetaTrader Supreme Edition FREE!
✔️ Access additional trading tools such as the Sentiment Trader and Correlation Matrix.
️✔️ Attend live trading webinars for free to learn from experienced traders.
✔️ Trade currencies 24 hours a day, five days a week.
One of the best ways to get started is to open a FREE demo trading account.
This allows you to test all of the products, services and your own trading ideas in a virtual environment until you are ready to go live.
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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.