GBP/USD, NZD/USD: Bullish breaks bring tougher tests on the horizon

• GBP/USD and NZD/USD hit multi-month highs
• GBP/USD eyes 1.2800, a level it’s struggled at over the past year
• NZD/USD bulls reclaim control after midweek wobbles post RBNZ

GBP/USD, NZD/USD hit multi-month highs

GBP/USD and NZD/USD look bullish on the charts, breaking to fresh multi-month highs. With a light calendar in the UK and New Zealand, positioning tweaks ahead of Friday’s key US PCE inflation report looks set to drive the price action in the coming days.

GBP/USD bulls face major 1.2800 test

GBP/USD has managed to clear the high set last Wednesday following the UK’s hot inflation report for April, pushing to levels not seen since March. With RSI and MACD generating bullish signals, it looks like that cable may retest 1.2800 in the near-future, a level it has struggled to overcome over the past year.

The daily chart shows GBP/USD has pushed through 1.2800 on at least ten occasions since early August but delivered only one successful break, and even that didn't last long. Otherwise it’s been slim pickings for bulls with failure after failure being registered. As such, it looms as a key level this week.

Should it give way, there’s every likelihood we’ll see a push towards the high of 1.2894 set in March. If that eventuates, consider buying the break with a stop below 1.2800 for protection. Should 1.2800 defy the bull again, consider flipping the trade, selling GBP/USD with a stop above 1.2800 for protection. 1.2762 and 1.2690 are potential trade targets.

Given the prevailing trend, we prefer to buy dips or breaks, rather than fade rallies.

NZD/USD bounces as bears give up  

The setup is not dissimilar to NZD/USD which broke above the highs set last Wednesday following the RBNZ’s monetary policy decision, hitting levels not seen since the middle of March.

It’s hard not to like the price action over the past week, with bulls managing to repel wave after wave of selling ahead of support at .6083. Just check out the pair of bearish pin candles printed midway through the week, followed by a big fat bullish candle on Friday which saw NZD/USD bounce back into the uptrend it’s been in since the start of May. Nice!

Last Wednesday’s high may now act as support, allowing traders to buy the break with a stop below .6153 for protection. Possible trade targets include .6218 or .6277.

-- Written by David Scutt

Follow David on Twitter @scutty

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