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Thursday, 13 December 2012

GBPNZD

GBPNZD looks ripe for a Reversal from these levels, not only is there strong trendline support but it seems that Credit spreads aren't responding in the same way and a divergence there is occuring. NZD has been going really strong recently and is due for a short period of short covering.

GBPNZD. Thomson Reuters.
Here is GBP-NZD 10Y spread overlayed with GBPNZD exchange rate, they have clearly diverged over the past few days and due for a recoupling.

GBPNZD (Orange/RHS) vs. GBP-NZD 10Y spread (white/LHS)

We recommend Long at 1.91 the levels we see are a move toward 1.9250/55 ( previous swing low which will act as resistance) or a stop on close below 1.8930/50 (previous swing low).
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