Moving away from the EU, we are taking a look at the GBPUSD and NZDUSD.
We highlighted earlier in our Forex Trading Analysis the potential of a GBPUSD breakout but wanted to give it more context in our trading ideas section.
For much of May, the GBPUSD was looking like a winner as it climbed about of its 1.56-1.60 trading range to hit 1.6400. However, after 1.6000 support failed, the pair quickly went into a nose drive and fell hard to under 1.5300. During the drop, the GBPUSD never managed to log any meaningful support levels. That fact was surprising at it appeared very well bid when it was trading above 1.6000. As such, the reemergance of GBPUSD support, at the same time as the EURUSD losing all of its weekend demand from the Spanish Bank Bailout reveals that the GBP is once again seeing a rotation of Euro's headed toward UK. As this similar move led to the Pound being one of the strongest currencies in May, it is importnat to watch how strong the Pound trades now.
Based on the potential that was seen in the GBPUSD in May, the GBPUSD looks like a solid breakout play to the upside if it can trade above 1.5600. As the chart shows below, the pair has failed at this point several times already. Therefore, we wouldn't be buyers on any immediate move above 1.5600, but prefer to see the GBPUSD not only trade above 1.5600, but close above that level as well.
NZDUSD: Above its Start of the Week Upward Gap
The NZDUSD is trading to a new week high as it is above its earlier gap highs (see chart). However, the RBNZ is holding their Interest Rate Meeting later tonight/early tomorrow morning (depending on where in the world you are). As such, after hitting over bough levels earlier this week, the NZDUSD has stayed above its 20 period MA (green line) on the 1hr chart. Therefore, if the RBNZ meeting goes dovish, it could trigger NZD weakness. For us, that means shorting the pair if the 5 period MA (red line) drops below the 20 period MA.