Currency - GBP / New Zealand Dollar

The Sterling - New Zealand Dollar chart has the appearance of a wedge of cheese. It is apparent that all traders are watching this same pattern and are happy to buy their NZ Dollars around NZ$ 2.60 and just as happy to buy Sterling around NZ$ 2.54. This 6 cent range is one of the narrowest I have seen in ages in this currency pair. You can see yourself from the chart, this is one of the most volatile exchange rates in the market and sharp spikes and troughs go with the territory. However, this narrowing of the range and, we hear, a reduced volume of trade are characteristics of a nervous trading environment. Traders are a bit like Newton’s ‘body at rest’. They need an external force to get them moving and while everyone is trying to assess where we are in the economic cycle and whether the recovery phase is anywhere near the light at the end of the tunnel, thin markets are highly likely. It does though mean that when those traders are shoved into action, the action will be fast and furious. Consequently, short term requirements are best managed within this trading pattern but longer term needs might be best met by placing ‘tongue in cheek’ orders at higher levels. It’s not shown on this chart but, having covered some of my requirement to buy NZ Dollars at current levels, I would be tempted to place a limit order for the rest at NZ$ 2.66. It may not be hit but, nothing ventured.....