GBP/NZD Trading Tutorial

GBP/NZD is a minor pair in the price market that comprises two different exchange rates. The relationship between the United Kingdom and New Zealand influences the volatility of the GBP/NZD. some factors that affect the GBP/NZD exchange rate on the global market are: 

  • Financial policies in the EU
  • Prices of raw materials and agricultural products 
  • The two countries’ respective trade balances
  • Three-point economic indicators
  • Oil prices 
  • seasons and weather patterns 

Direct sales and purchases of the British and New Zealand dollars are possible. This suggests you can exchange them from one currency to the other without first switching any of the currencies to dollars. 

The British pound is ranked fourth among traded currencies in the world, while the New Zealand dollar is ranked tenth. Spreads have decreased and the ability to trade these pairs has increased in recent years.

 Currency pairs that are directly exchanged include GBP and NZD. As spread prices have decreased over time, traders find it easier to trade currency pairs other than EUR/USD. 

The GBP/NZD exchange rate determines how much NZD a pound will buy. As an example, consider the 1.9712 GBP/NZD exchange rate. To buy a British pound, you will need 1.9712 New Zealand dollars. On the forex market, it’s expressed as 1 GBP for X NZD. 

From October 2020 to October 2021, the most active pair is the GBP/NZD, which moved 174 pips per day on average. As a result, this pair is one of the fastest-growing in the forex market. 

Trading the GBP/NZD pair can be difficult for a new investor, but it is a promising position for greener pastures for any professional trader. 

GBP/NZD is active in the United Kingdom between 8:00 a.m. and 5:00 p.m. However, any market news can cause a surge in price action at any given time. 

History of the GBP/NZD 

The British pound began to circulate in the seventh century. The British pound was first introduced by the Bank of England in handwritten notes. With time, it gave way to printed notes and coins.

 In 1971 when a decimal system was introduced it changed, allowing the pound to circulate in both the domestic and international markets. 

Since it is one of the frequently traded currencies, the British pound is a valuable asset in forex. The New Zealand dollar was enacted into law after the New Zealand congress approved the decimal currency act in 1964. 

It switched from imperial to New Zealand dollars. Kiwi bird symbol printed on the New Zealand 1 dollar coin made the GBP/NZD pair to get referred to as the kiwi. 

In 2001, the pair suffered the greatest spike in the forex market, with a pound selling at $3.6909. Its value dropped for the next few years as a result of the whole blowup. The drop in the value of dairy products increased its value to $2.06 near the end of 2014. 

After that, the price rose until it reached its second-highest point in 2015, at 2.4543. The Brexit referendum sent the GBP value plummeting when the people of the United Kingdom voted to leave the European Union in 2016. 

The investors that withdrew their funds from the United Kingdom viewed this move with doubts. The GDP decreased in value. Many shareholders took this action because they were uncertain of what will happen next. 

Its value went up once again, from 1.6846 to 2.0377 at the end of October 2018. In 2019, the GBP/NZD experienced a wavy stock price in which its price depreciated. 

It rose towards the end of the year, reaching 2.0566 in October. The coronavirus pandemic in 2020 destabilized its value. Since then, it has been surging up and down. 

The highest piece was 2.094 in April, but it then dropped to 1.8663 in November. The mean exchange rate in 2020 was 1.9755. 

The GBP/NZD price chart has seen an increase and decrease in price in June, July, and August, and a drop in September 2021. The rate is currently 1.9648. How to Trade the GBP/NZD Currency Pair 

You can understand how the GBP/NZD behaves in the currency market by having a look at its history.

Let’s take a look at what you need to do to begin trading

Step 1: Sign up for a trading account with a trading broker.

It is advantageous to have a trading account with a reputable trading broker to trade the GBP/NZD pair. The GBP/NZD is volatile, a good broker should charge a lower spread fee than other brokers.

Don’t fail to take a look at the margin percentage they’re providing. Check out E forex brokers such as RoboForex, Markets.com, and Vantage FX.

Fill in your credentials when you create an account to verify it.

Step 2: Get a trading platform

A forex broker is similar to a financial institution, it holds your money, whereas a trading platform provides access to a market. You can trade the GBP/NZD using any trading platform, including MT4 or MT5. It depends on the broker you are using.

Step 3: Conduct a market analysis

As the history of the GBP/NZD shows, it is a volatile pair. However, in this article, we’ve highlighted a few key areas to consider. Profitability is influenced by fundamental and technical analysis.

Step 4: Read the quotation

The GBP is the base currency in the GBP/NZD pair. The quote currency is the New Zealand dollar. At the time of writing, the GBP/NZD exchange rate is 1.95495. This means that 1.95495 NZD is needed to acquire one British pound.

There will be a buy-and-sell option in the quote. The buy option is the price you pay when you buy, and the sell option is the price you pay when you want to exit.

Step 5 Determine an entry and exit point

At such a point, your analysis should help you figure out the best market position to buy. If you presume, based on your fundamental and technical analysis, that the GBP will rise against the USD, you buy.

When you enter the market with a buy position, open a GBP position at the buying price, for example, 1.95495.

Enter the market by taking either a buy or a sell position. A position is closed by either buying or selling. The evaluation you conducted will tell you how to enter and exit the market.

Another suggestion is to be patient when waiting for the price to adjust because the price can change at any time. Getting anxious isn’t a good idea at this point.

Later, when the market moves and you notice that your GBP/NZD asset has increased in price, say to 1.96200, you close your position.

The opening and closing position is the most important aspect of the overall process. That is why analysis is critical.

Factors that influence the GBP/NZD exchange rate

The prices of exports from both countries have a significant impact on the GBP/NZD price movement 

New Zealand exports the majority of its agricultural products. Fuel, milk, wool, meat, transportation machinery, and mined resources such as metals and ores are examples of products.

New Zealand’s economy is supported by a robust tourism and service industry.Britain, on the other hand, is a powerhouse in the export and import sectors. Steel, gas, electrical and electronic equipment, machinery, vehicles, and chemicals are all outsourced from Great Britain. 

Even though Britain exports oil, it is also the world’s largest importer.

The British economy is the sixth-largest in the world. Britain and New Zealand have had a long relationship because they have been trading since the beginning of the twentieth century.

Commodities fell in 2014, notably dairy products, which influenced the rise in the value of the GBP/NZD Dollar in the forex charts.

The political climate in Britain and New Zealand

The countries’ political atmospheres could also make the GBP/NZD volatile in the foreign exchange market. If there is civil turmoil in the United Kingdom or New Zealand, the purchasing power suffers. 

The Brexit referendum in the United Kingdom stirred up interest in 2016.

The decision to leave the European Union sparked disagreements among UK stockholders. The referendum caused investors to withdraw funds that were supporting the British pound. As a result, the GBP/NZD fell in value in 2016.

The political and commercial move known as Brexit, which lasted until 2020, had repercussions on the forex market. These developments are likely to last for a longer time. 

Nonetheless, many trading brokers interpreted this as good news and jumped at the opportunity to trade the currency’s volatile price.

Monetary policies 

Currency aspects in regions are a constant source of information for forex traders. It is effective to track the rise and fall in prices and commodities when analyzing forex.

The Bank of England is in charge of the sterling pound’s monetary and financial stability. The Reserve Bank of New Zealand is in charge of the country’s financial resources.

In the scenario of a country’s steady economic progress, this is an illustration of how it works. The banks will set interest rates, which will increase to investors.

The majority of investors are attracted to currencies that generate a return. The pound or the New Zealand dollar will be affected by the increase in interest rates.

To sum it up, the monetary policies implemented by financial institutions have an impact on the fall and rise of price levels in the forex GBP/NZD. 

Fundamental analysts constantly watch news released by these financial firms in forecasting future price changes.

The economic state of trading partners

Significant economies around the world have made economic ties with the United Kingdom and New Zealand. Many European states have agreements with the United Kingdom. France, Germany, the United States, the Netherlands, Ireland, and China are just the top six economies.

New Zealand produces a large number of agricultural products. Agricultural goods, primarily dairy products are the largest export in New Zealand.

 These goods are shipped by New Zealand to several countries. China, Australia, the United States, and Japan are the top five countries.

Slow economic growth effects will show in the exchange rates in years to come. The slow growth is because the trade in goods sectors contributes to a major fraction of most countries’ revenue.

Financial constraints have an impact on good external trade. It has an impact on the countries to which they outsource or extract goods and services. As a result, other countries that exchange products must be recognized while examining the GBP/NZD trend.

The economic setback caused by the coronavirus is an excellent demonstration. All the affected countries suffered a major setback, which had an impact on the forex market.

Due to the economic implosion of companies around the world, the currency market seemed to be extremely volatile. In key markets, a huge percentage of market participants sold their securities.

The economic state of Britain and New Zealand

When trading the GBP/NZD, the financial systems of the United Kingdom and New Zealand are important factors in the trading activity. The GDP growth of each country is what you are keen on.

The GDP growth of each country is what you are keen on.

Any country’s prices are affected by a significant fluctuation in GDP growth. Another thing to keep an eye on is a country’s jobless rate. When a country’s unemployment is high, it implies that economic growth is slow.

A country with low unemployment, such as the United Kingdom, has an adequate workforce to keep the economy afloat. High economic growth is related to a strong labor force.

If the UK’s GDP rises, the GBP/NZD prices go up, and if the UK’s GDP falls, the GBP/NZD price goes down.

What are the merits and demerits of trading GBP/NZD?

The GBP/NZD exchange rate has a significant potential of making a good profit in a brief period. This currency pair is not as well-known as the greenback or other forex pairs. It has benefits and drawbacks, just like every other currency pair.

Advantages of trading the GBP/NZD

It is volatile 

The GBP/NZD is a decent set to try for traders who enjoy volatility. It is turbulent, and good traders who comprehend how to apply their strategies can profitably trade.

It also gives those who want to bring their trading strategies and knowledge into practice on the market further experience.

Positional trading

Whenever a trader undertakes position trading, they maintain the trading positions open for an extended duration. Patient traders engage in this type of trading.

 They can put their investments or security on hold until the value goes up. Long-term trend trading is another term for it.

Traders can trade the GBP/NZD using position trading. It is used for long-term trading while other trading pairs are used for short-term trading since it’s not a major forex pair. It also eliminates any need to close trades after each completion.

It is a fast-moving currency set

This pair is rapidly growing, which saves a trader the time and energy of having to wait for it to move before closing a position.

Disadvantages of trading the GBP/NZD

The GBP/NZD has disadvantages that come with its fast movement.

It is risky 

It’s risky because of how volatile this pair is. It has high liquidity and moves quickly. It’s also the most profitable because of its property of volatility. The stronger the risk, the bigger the reward.

It’s easy to lose money trading the GBP/NZD without a sound plan, especially without a stop-loss attempt.

This pair undergoes drastic changes in a brief period, which means an ill-equipped trader is prone to lose.

It is expensive to trade the GBP/NZD 

The GBP/NZD pair is extremely illiquid. This implies that it is not widely used. A large price gap exists between the New Zealand dollar and the British pound sterling.

A wider spread means that you will spend more for the spread service charge even if you generate a profit on a trade. The brokerage firm receives the spread service charge.

 Spreads on stronger currencies, such as the USD/GBP, are relatively small. A widespread fee applies mostly to weak/ exotic currencies.

Because the New Zealand dollar is smaller, it is widely used. Trading is more difficult due to the wider spread.

GBP/NZD trading strategies

Many people have devised various strategies for trading the highly unpredictable GBP/NZD pair. You can profit from this pair in a variety of ways, depending on your expertise.

 Here are a few suggested trading strategies that have demonstrated success in the past:

Trend trading the GBP/NZD pair

We mentioned earlier that one of the benefits of the GBP/NZD pair is the ability to trade for long periods. Trend trading is a strategy that safeguards your funds by thinking long-term. It means you’re following a trend with the help of exchange rate background research.

Advantages of trend trading the GBP/NZD 

It saves time

The only time you’re engaged is when you’re studying the GBP/NZD currency’s history. Since you’re playing the long game, you’ll be able to do other things once you’ve entered the price market, as market prices adapt over time.

More money

Long-term trading generates profits that are over double those generated by day trading. The GBP/NZD pair is one of the quick pairs where you can make big money. Because the profit target is higher than what you’d have intended for the long run, it has more profit.

Less demanding

Small trades necessitate near-perfect analysis. It also requires your presence and ability to respond to small market movements. It can be stressful to put in all that effort when you don’t know how much money you’ll make.

Because you are not focused on small price swings, trend trading allows you to relax and follow the market.

Less risk

Trend trading carries a lower risk because it is easier to anticipate market changes and make appropriate moves. Day trading is more difficult because small shifts can be significant and difficult to predict.

There’s less risk because the stop loss is more successful on long-term trades than on short-term trades. Even after slight market tweaks, the price can move for a long time and adapt without being affected by small surges.

Disadvantages of trend trading the GBP/NZD

Slow indicators

Trend indicators can indicate that a trend has already begun, but it would be too late in the trend to use them. They have a valid reason; they have to collect all useable data before sending out a signal.

 Although it can provide sufficient knowledge, most indicators are delayed, signifying a trend when it is nearly over.

Losses outnumber gains.

Traders with a lot of trend trading experience can attest that trend trading produces more losses than profits. This is particularly true in a highly volatile market like the GBP/NZD.

The most common cause of losses is the market’s unpredictability. Another possible explanation is that false breakouts will reoccur in the market. These  breakouts are misleading, and most traders lose money in the process.

However, the good news is, by making more small trades on a trend over time, you may be able to cover all of your losses.

The currency’s unpredictability

One disadvantage of trend trading is that all markets are uncontrollable. You might not always get a profitable trend wave. You can get a positive trend at other times, but you can’t predict if it will end or start.

A trend has a lot of consolidations due to its nature. As a result, trend trading is more difficult to master than other techniques.

 One way to learn how to use the trend trading strategy to make money is to do further research and trend trading practice.

When trend trading the GBP/NZD pair, keep the following in mind

Determine the type of trend you’d like to trade

When the monthly economic data or news is issued, the GBP/NZD pair sees a lot of volatility. Also, when central bank interest announcements are released publicly.

There has also been significant movement in response to events such as Black Wednesday and the news of the Brexit referendum. The ideal time to monitor trends is between the hours of 8 a.m. and 5 p.m. eastern standard time.

Uptrends, downtrends, and side trends are trend patterns. The GBP/NZD price movement appears to be moving up in an uptrend. An uptrend occurs when the price rises by let us take an example; 200p falls by 40p, and rises again by 100p.

When the price movement decreases in price, it is termed a downtrend. A downtrend is defined as a market when for instance the price decreases by 100 pips, increases by 50 pips, and then decreases by 200 pips.

There is a trend in which market values appear to be steady or move in a predictable up and down pattern. It is called a side trend or consolidation.

 After an uptrend or downtrend, the GBP/NZD price tends to form consolidation movement patterns.Decide which one you want to trade after you’ve reviewed the stock prices.

Formulate a plan for entering and trading the market, and stick to it

Since the GBP/NZD is a minor pair, keep an eye on it during the Asian and European sessions. During these sessions, important news that could affect the market can be announced. Any other news that could cause a shift in the trend prompts alertness.

In addition, the GBP/NZD market moves similarly to the GBP/JPY and GBP/AUD markets. Follow the market movement of these pairs when performing technical analysis.

Because Japan and Australia are trading partners with New Zealand, their trends are similar.

When you want to enter a market on an uptrend, buy when the price is slightly lower. Once the market price gains traction, you keep a close eye on the price action.

If you want to enter a down-trending market, sell when the price rises. Then track the progress as it drops.

Establish a profit target and a loss-control strategy

One method of securing your funds is through setting a target at which you believe you will stop trading. A profit goal can help you avoid becoming greedy and desiring more.

 Close your position when the price movement reaches the level that you designated as your stop profit.

The point is that setting a profit target prevents you from wanting to trade more, resulting in a loss. Emotional trading is the expression for this type of trading.

 The desire to gain more and more may cause you to lose money by risking more than you can afford to bargain.

When trading the GBP/NZD, it’s vital to have a profit target and a loss management strategy. Because the market is volatile, it is prudent to plan for expected losses.

A loss management strategic plan is similar to putting risk restrictions on the size of money you’re trading. When you prepare to buy and sell, decide what percentage of your capital you’re willing to risk.

The stop-loss order is yet another method of risk management. The price target is its polar opposite. It makes no difference how much expertise and experience you have in currency trading. The volatility of the GBP/NZD pair could throw you off.

A broker issues a stop loss command to the trading platforms. When the GBP to NZD exchange rate falls below a certain level, it allows a trader to sell at a loss. When placing a stop-loss order, be cautious not to place it too soon.

Some stop-loss orders may induce an early exit before the market picks up speed.

Margin is often used by traders who choose to trade the GBP/NZD long term. The fast movement of the GBP/NZD causes the risk or profit to amplify.

The majority of traders put 1%-3% of their capital at risk. It’s a good idea to have a risk strategy in place, such as this one. 

With a risk management strategy, clearing your capital will take longer than it would without. That is if you only have losses in a row.

To avert making a loss, the stop loss should be placed strategically and correctly. All markets are distinct, and various price markets employ different trading strategies.

Trading the GBP/NZD pair using the swing method

Swing trading is the practice of profiting from price fluctuations that occur in short bursts. A swing trader must first hang tight for the market to move in the desired direction before taking action.

When you decide to swing trade, you must act quickly. In the event of a delay, the market price movement may be affected.

Swing trading the GBP/NZD pair is the most effective strategy, especially when liquidity is accessible. When many traders are selling and buying the GBP/NZD, that is when it is liquid.

Swing trading allows a trader to make small trades for days or hours depending on the price action in a liquid market. A liquid market is beneficial when swing trading for a short time.

Swing trading the GBP/NZD has many advantages.

It takes less time to complete

When swing traders want to trade, they take a short time in front of their computers. You can trade the tiny pulses in the GBP/NZD market because it is a volatile market.

Reduces the amount of money spent on commissions and spreads

Swing trading can lead to significant savings by reducing the amount of money you spend on broker fees. Because of the widespread, swing trading, the GBP/NZD is costly regardless of the type of wave.

Because the GBP/NZD is a minor currency pair, it has a hefty fee. Swing trading the GBP/NZD enables you to save more money than day trading the financial asset.

It prevents overtrading

The GBP/NZD market is so volatile, there is a desperate tendency to trade every market price. Choose a price trend and a position to stop trading to avoid instinctual trading.

Swing trading the GBP/NZD has some drawbacks

It requires a relatively more initial investment

This strategy will necessitate a larger initial investment. You must deposit the lending rates if you decide to trade on margin. 

Because of the amount of money you put into the trade, the high requirements expose you to more losses. The greater the capital increases the likelihood of loss.

Market gaps

Swing trading differs from day trading in how it allows you to trade for longer periods. Even so, trading gaps that you overlook could cost you a lot of money.

You could go to bed and wake up to a market that has entirely deviated from your forecast. The bad news is that stop losses fail to help you in this situation. As a result, you must conduct extensive research before trading with this strategy.

More market research is required

Trading the GBP/NZD takes a little more effort. This is a fundamental analysis, looking at various chart patterns of the GBP/NZD.

You’ll need a lot of research if you want to pinpoint the best time to get in and out of the market when swing trading.

Self-control

Swing trading the GBP/NZD requires emotional restraint on the part of the trader. Moderation is the key to successful swing trading. When the price deviates from the predicted cause, a new trader may be disoriented.

In a live trade, the market demands a trader who will let the price move to its conclusion without obstruction. This restraint should also enable you to stick to and trust your strategy to the end.

When swing trading the GBP/NZD, the three main strategies should work:

Make a strategy and commit to the strategy

The GBP/NZD pair is unpredictably volatile, like all other forex pairs. Its market value could rise or fall at any time. As a result, every trader must be well-prepared before entering a market. As a result, when attempting to enter this market, every trader must be well-prepared. 

Before making any decisions, do your homework. In the swing trading strategy, research is very important. When to enter and exit the market is a decision that only you can make. 

Swing trading the GBP/NZD has been described as tedious by most traders who have tried it, but it is possible if you do your homework.

Make sure you determine which direction you want to trade-in before you start.

Consider placing a stop-loss order on whichever trend you choose to reduce any possible risk. Evaluate the risk-to-reward ratio to determine how much profit you should expect from the trade.

Select a stop order

When the market price has reached a certain level, place a stop order. When swing trading the GBP/NZD and other markets, this command is essential.

The stop order is determined by the time that the market price moves, depending on your research. It may take some time for the market to meet your stop order.

You might want to put a stop order in place at a strategic point where you can make the most money. If a stop order is placed inaccurately, it may obstruct highly promising profitable opportunities.

 The stop order could’ve been placed too early or too late, resulting in a loss rather than a profit.

Make sure the entrance to the market is timely

There is a downtrend and an uptrend in the GBP/NZD price swings. Because of how dynamic this market is, the timing of your entry is vital. Make an entry once you’ve found a point that you feel is appropriate.

Use the indicators to help you choose a point of entry. A corrective wave with a pullback is the best time to make a move. Before trading the GBP/NZD, you should be aware that it moves quickly.

You won’t have to wait long for the position to become available. Because this is a volatile and fast-moving market, use a stop loss. Before you enter the GBP/NZD market, bid your time. Since it moves quickly, it reduces the use of leverage

The price market is promising, with more than 1200 pips available for trading. Any new activity, however, could cause a surge upwards or downwards due to its unpredictability. Such movement can result in a massive loss, which is amplified by the fact that you used a margin.

Now that you’ve learned how to trade the GBP/NZD, the final step is to follow all of the rules. The best forex brokers should be carefully selected. A good broker can help you improve your market knowledge.

Trading the GBP/NZD with the carry method

Carry trading is a technique used by currency traders to extract profit from the GBP/NZD duo. It entails taking out a low-interest debt and replacing it with high-interest credit. Finally paying off the borrowed currency after the interest has accrued. 

Assume you take out a $10,000 loan with a 2% annual interest rate. Use the loan to buy a property that will appreciate at a rate of 5% per year.

When your investment has appreciated over a year, you sell it and pay off the loan. The earnings you made are the difference of 2% from 5%. That is how to carry trading operates.

Because of New Zealand’s automation and industrialization, the New Zealand dollar has a high rate of return. Unemployment and rising housing prices amplified the increased interest.

Carry trading the GBP/NZD has several advantages

Steady source of income

You can make a good income as long as the exchange rates are widely used and the rate of return is going up.

Carry trading is financially viable if growing shareholders put their money into high-interest currencies. Its price value rises as a result of increased demand.

Carry trading works well in markets with low vitality

When the GBP/NZD pair seems to have low volatility it indicates that market action is limited. It is the most favorable time to carry trade.

Carry trading the GBP/NZD has some drawbacks

High-risk situation

Carry trading as a risk. Anticipate losses if the exchange rate fluctuates a lot. This approach works with currencies that have a wide spread and stable exchange rates.

How to Trade the GBP/NZD with the Carry Trade technique

We all understand how unstable the GBP/NZD exchange rate is. This indicates that it is widely used. Some factors have contributed to the NZD’s high-interest rates. The retail sector is doing well, and there is a high yield due to the integration of technology in their industries.

The Coronavirus has also played a role in the rise in exchange prices. During the pandemic, the Polish people were given financial aid to adequately address their basic needs.

Carry trading the GBP/NZD is a valuable trade for these and many other reasons. 

  • Borrow the British pound from your broker at a fixed interest rate.
  • Purchase the New Zealand dollar with the British pound, which has appreciating Value.
  • Keep track of the exchange rate difference and the interest rate until it increases to a point.
  • Buy back the British pound you borrowed. Your profit is the difference between the interest rates.

It’s not enough to insist on conducting fundamental research before carrying out carry trades on the GBP/NZD. The best time to carry trade is during news about a dramatic increase in the New Zealand dollar’s rate of interest.

If you want to get the most from the GBP/NZD carry trading system, trade it short-term. If you are confident in your investigation or any current affairs, using leverage to multiply your profits is viable.

If the market moves against you, leverage is risky. You may lose everything you’ve put into your account. If it all goes well, you should be able to turn a profit from buying and selling the GBP/NZD.

Don’t limit yourself to just one tactic of trading. The essential factor to do before trading is to undertake detailed research to remove any doubts and boost confidence.

If you’re unfamiliar with trading and have any hesitations, start with a demo account to develop skills before investing real money.

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