GBPNZD

GBPNZD will be a familiar currency pair for anyone trading commodities or looking for a gap year. It is the 10th most traded currency in the world, which is interesting when you consider the New Zealand economy is the 50th economy in the world. As a result it contributes far more to the currency market than it should. This is due to the stable economy and politics it is attached, contributing to trading opportunities for retail Forex traders. 

GBPNZD Live chart: Current exchange rate

GBPNZD refers to the pairing of the British Pound with the New Zealand Dollar. When you place an order for GBPNZD, you buy GBP and sell NZD simultaneously. GBP is the base currency and NZD is the counter currency.

In the GBPNZD pairing, the New Zealand Dollar is considered “weak” compared to the Pound. Exchanging NZD for BBP allows you to buy more Pounds than you would if they had equal exchange rates.

Screenshot courtesy of TradingView!

How to trade GBPNZD

Here is the procedure: 

• Place an order.
• The forex broker buys the base currency (GBP) at the “bid” price.
• The forex broker sells the counter currency (NZD) at the “ask” price.

GBPNZD key characteristics

• The New Zealand dollar responds to Australia’s economic condition. Pay attention to economic conditions in Australia, even though the Australian currency is not part of the GBPNZD currency pair.
• The New Zealand dollar changes in value based primarily on commodity prices, particularly agricultural commodities. Watch commodity prices to anticipate changes in NZD valuations.
• GBPNZD forms long-term trends. Trend traders find this pair attractive for that reason.
• The pair offers good liquidity. You are not likely to be unable to buy or sell.
• The GBPNZD has been in an extended decline during 2022.

Why trade  GBPNZD

The British Pound is a premier world currency, meaning you can count on it as a stable base currency in a currency pairing. GBPNZD is somewhat volatile, which means rate fluctuations can be significant. That provides numerous opportunities to make speculative trades. Because the Pound itself is less volatile, you can watch New Zealand conditions as the source of value fluctuations, while relying on the Pound to be relatively steady or rise significantly.

A GBPNZD trading strategy

Timing

Forex trades worldwide in a variety of sessions that are geographically based. 

GBPNZD is most active in the London trading session. In addition, the Tokyo session can be quite busy for NZD, which of course, affects the pair. The London session begins at 7:00 GMT and lasts to 16:00 GMT.

Between 7:00 GMT and 8:00 GMT, the Tokyo session enters its last hour of trading. This can mean GBPNZD becomes quite active and that it may offer volatility forex traders can profit from.

Trade Reversal Patterns

Reversal patterns show where the previous trend may be reversing. A downtrend may transition to an uptrend and vice versa. You can spot reversal patterns in GBPNZD if you learn candlestick trading. Let’s look at examples of reversals.

Bottoms

Here is an example of a bottom and subsequent reversal in a trend. 

You can see that prices turned around and started an uptrend.  

Tops

Uptrends usually arrive at a peak and then reverse. 

Buyers give up and sellers take over. That drives the price down.  

There are many types of reversal patterns. See the candlestick trading guide to grow your knowledge of trends and reversals. 

Scalping

This approach involves short-term buying and selling—”short-term” as in seconds or minutes. You spot an uptick, buy, then sell immediately. Learn all about scalping here. 

Selection

Select the currency pairs based on your risk tolerance for risk. A higher-risk pair such as GBPNZD is not always the best choice for someone starting out. If you are a new forex trader, consider more stable pairs: 

• EUR/USD (euro/US dollar)
• USDJPY–US dollar/Japanese yen
• GBPUSD–British pound/US dollar
• USDCNY–US dollar/Chinese renminbi
• USDCHF–US dollar/Swiss franc
• USDHKD–US dollar/Hong Kong dollar
• AUDUSD–Australian dollar/US dollar
• USDCAD–US dollar/Canadian dollar

That does not mean you shouldn’t trade GBPNZD; just be prepared for riskier trades. 

Management

Do not put more than 1-2% of your trading account money in one trade. 

Use leverage carefully. “Leverage” refers to money a broker loans to you. If a leveraged trade goes badly, you could lose your original investment. Even if you lose money, you will have to repay the entire loan.

Use a stop-loss order That triggers an automatic sell if GBPNZD drops to a specified price. This will protect you against significant losses.

Trade using limit-buy orders. Such an order sets the highest amount you will pay. This will protect you from sudden spikes where you pay more for the trade than you wanted to. 

Do not make emotional trades. Set your rules and discipline yourself. Set a maximum loss you will tolerate, and don’t buy because some pundit says you should.   

News

Currency markets are heavily influenced by economic and political news. Some traders overreact.

Do not jump in or out based on the news itself. Wait and see what prices are doing. You can be surprised by market reactions.

If you are not in the market when news hits, wait until things settle down. 

History of GBPNZD

Let’s look at how some major events have affected GBPNZD.

• The British pound collapse of 1992

Black Wednesday (or the 1992 Sterling crisis) roiled the markets in 1992. The UK withdrew sterling from the European Exchange Rate Mechanism. Britain’s exchange rate plummeted.

• The September 11 Attack in 2001.

The attacks on the Twin Towers in New York City 10th shocked the world economy and drove the Pound’s exchange rate down.  

• The 2008 financial crisis UK
  

Banks failed, and credit availability fell sharply. Stock and commodity prices went down.

• Recession of 2016

Oil prices crashed and affected manufacturing and business investment.

Future predictions for GBPNZD

Long-term predictions

It is reasonable to expect the worldwide economic downtrend to reverse at some point, and the Pound should increase in value faster than NZD. This means GBPNZD could recover and rise. Investors have time to wait and see, as the downturn will not likely make a dramatic “v” shaped recovery. 

Medium-term predictions

GBPNZD may continue downward for a while. The Pound is losing value against NZD, and the downtrend will continue until there is an uptick in the economy (following a recession?). 

Of course, views on where GBPNZD is headed vary.

The difference between trading and investing in GBPNZD

Decide what style of investor you are. Do not switch because your trades will be undisciplined. Let’s look at the two major approaches:

Trading GBPNZD

“Trading” usually means putting money into short-term ups and downs. Traders may hold a position for minutes or seconds, and others stay in the trade for a week or a month.

Because GBPNZD is somewhat volatile, short-term traders like it. They watch for potential spikes and valleys in prices and jump in and out of trades.

To do this, you use indicators to spot favorable upticks or warning signs and get in and out quickly.  

Investing in GBP and/or NZD

“Investing” means a position for at least a year. The timeframe can be shorter if a trend fails, but the goal is to ride out long-term trends.

You do not fret over every little trade; watch for major patterns that indicate a sustained trend.

GBPNZD tends to form long trends, so it can be suitable for long-term investors. The trick is catching an uptrend, and this is most likely during a global recovery from a recession or pullback. 

5 Tips for Successful use of GBPNZD

• GBP is most likely to have a strong recovery from a world recession, so watch it to see if the exchange rate rises faster than NZD.
• Watch commodity prices in New Zealand. NZD will rise in value as commodities rise in value. This could make GBPNZD less attractive because you want a large spread between the two currencies. If NZD rises and approaches GBP value, the pair is less appealing.
• GBP and NZD are in the top ten currencies traded in the world. Do not trade like NZD is an emerging currency. It is reasonable to expect it to show strength along with the Pound, Do not assume you will always have a big spread to trade.
• NZD is a proxy for the Australian Dollar (AUD). Watch what AUD is doing to predict what NZD may do.
• Trade or invest in GBPNZD, do not do both. Choose either a long-term or short-term approach and do not mix them,. They are two different ways of thinking.

What are the risks with GBPNZD?

The biggest risk for GBPNZD is the world economy. It is said that rising tides lift all boats, but the opposite is also true: a low tide lowers all boats. What this means is that it is unlikely that the Pound will make a dramatic move to the upside during the world downturn. So it is reasonable to expect GBPNZD to decline for a bit. 

GBPNZD: General terminology

Pip – “Pip” refers to “percentage in point,” sometimes called “price interest point.” It is the smallest price an exchange rate can move. Example: GBPNZD can make a $0.0001 move. 

Exchange Rate – The value of a currency compared to another one.

Bid/Ask Spread, or Spread – The spread is the difference between the exchange rate for GBP and NZD.

Minor Pair – The pairing of a stable currency with a less stable currency. This is considered a higher risk. There are three types of pairs: major, minor, and exotic. GBPNZD is a minor pair.

Risk Management – Protecting yourself against loss of money. Short-term traders may watch their positions hourly. Longer-term investors may check positions daily and weekly. It also means placing a stop-loss order.

Stop-loss Order – This sell order triggers automatically when the price drops to a level you select.

Limit Order – This is the highest price you agree to pay for your trade.

Leverage – A loan from a broker.

Margin Call – A margin call happens when you are losing and the broker asks you to make a payment on the loan he gave you.

Gapping – This is a jump in prices without any trades between. During volatile times, gaps do occur in GBPNZD. 

Conclusion

The GBPNZD pair fluctuates based on the strength of the British Pound vs. The New Zealand Dollar. It goes down in value as the Pound drops toward the level of the NZ Dollar. Traders profit by purchasing Pounds using NZ Dollars when the price difference is large. You can trade it profitably if you study the influences on the value of each. 

Frequently Asked Questions (FAQs)

Is GBPNZD volatile?

Yes and no. GBPNZD tends to form long-term trends, but it can have sharp ups and downs within those trends. Think of it as zigzagging in a general direction.

What is the nickname for GBPNZD?

GBP is often called “sterling,” and NZD is termed “kiwi.” You could call GBPNZD “sterlingkiwi.” 

Why is the New Zealand Dollar called “NZD”?

When currencies are called “dollars,” it is helpful to show which countries dollars you are referring to. “NZ” stands for “New Zealand.” 

Is the New Zealand Dollar a safe currency?

It is relatively safe. It is the 10th most-traded currency in the world. 

Is the New Zealand Dollar correlated with gold?

Yes. It is correlated with the Australian dollar, which is correlated with gold. 

Does GBPNZD have a big spread when trading?

It can have. But not always. When you see a decline in the GBPNZD chart, the spread is getting smaller. The price goes up when GBP is much more valuable than NZD. In other words, the bigger the spread, with GBP having the most value, signals that the pair’s value is rising.

Which is the safer currency, GBP or NZD?

GBP would be considered the most stable, which could be regarded as safer.  

Should I invest in GBP or NZD?

Investing in either of these currencies could be profitable if they rise in value, so there is no “yes” or “no” answer at any given moment. That said, the Pound is a primary world currency that will most likely recover from its lows.  

Should I trade GBPNZD?

This decision depends on whether you think the exchange rate for GBP will rise faster than that for NZD. It is the difference between the two currencies that makes this trade profitable. Look for a big spread between them, with the GBP having the higher exchange rate.