GBP/USD likely direction

Fibonacci

My starting point for chart analysis is the Daily time frame. On the DTF my first action is to place Fibonacci points across the highs and lows.

Earlier this week when GBP/USD was at 1.6453 area I posted this:-

GBP/USD is now at the last chartable support point before the 61.8 fib at 1.6282


As can be seen the move down by GBP/USD has hit the 61.8 exactly and as I type this has moved away.

This presents a number of trading possibilities and options however the waters are muddied because at 13:30 we have the most significant news release of the month - Non-Farm Employment Change and Unemployment Rate out of the USA.

Had this been a non news day reaching such a significant point on the chart (61.8 fib or 38.2 fib depending on how you set the Fib) then you would have been advised to exit SHORTS here.

The area would also present an ideal opportunity to go LONG with a stop just below the Fib area.

It also presents an opportunity to SHORT the GBP/USD if the 1.6280 line is broken.

With such significant news however coming up, spreads will widen and STOPS could be whipsawed out.

The expectation is for a surprise to the good for these numbers and its likely that recent USD strength has factored this in.
What this means is if the numbers are only marginally better than expected or actually miss target there’s likely to be some sustained USD selling which will benefit GBP LONGS.

If you’re not in this market I’d wait until the news comes out and evaluate accordingly.

NFP Update.

Non-Farm Employment change was expected 226k but missed by some margin at 142k.

This has sent GBP/USD BULLISH since the news was released but progress has been weak.

Clearly the GBP BEARS still expect to take control of this pair once the BULL fightback weakens. 1.6386 where the 50 sma comes in on the 5m is the most likely point where the BEARS may launch a response.

I expect GBP to track north from here until we reach this area.

Having said that there is overall GBP weakness so staying out of the market is advised although LONG from here (1.6331) with a STOP at 1.6306 is possible for the adventurous (25 pip risk)


Fridays bullish hammer close would have given GBP BULLS some hope that there may be a reversal in the relentless selling of GBP/USD and without news at the weekend the chances were that GBP would have opened higher.


YouGov changed all that.

Their poll suggesting the YES camp had taken a narrow lead in the Scottish Referendum (51% 49%) was enough to seriously spook the market and sent GBP/USD into a tail spin and it gapped lower on the open last night.

So where to from here.


Its well known in trading that markets don’t like gaps and there may be an attempt to close this gap on GBP/USD over the next few hours.

The gap currently is 100 pips.

In the absence of any further direct GBP news and with RSI oversold and MACD turning north, GBP could attempt to reverse this knee jerk GBP move.

1.6284 is key. This is the 61.8 support turned resistance.

My guess would be price will head for this area. A LONG here (1.6174) with a STOP (1.6140) underneath the low is worth considering for a 34 pip risk.

(* Please ignore the screen shot below . I’m not sure where its come from as its from a post I made last week and I can’t get rid of it).


In my last post I said that GBP/USD would attempt to close the gap that occurred as GBP/USD opened after the YouGov pole that was so damaging to GBP BULLS.

As it turned out the BEARS forced the price down a further 100 pips and the price hit my recommended BUY target at 1.6051 that I posted on my website on the 8th September. That LONG is currently 101 pips in profit with a STOP at 1.6152 though I expect the BULLS to drive the price higher yet.
I added to my LONGS at 1.6139 and both these trades have the same 1.6152 STOP.


The 1.6286 61.8 fibonacci may prove tough resistance but I expect GBP BULLS to take the price up to 1.6311 before we see a meaningful reversal.

The hourly 200 sma could prove pivotal for GBP/USD. If the price can break through this area (1.6314-1.6350) then 1.6600 is a possibility.

However. GBP is particularly news sensitive and literally any incautious word can destroy any analysis.

As suggested previously Monday’s opening is being closed by GBP BULLS.

With the latest polls on the Scottish Referendum suggesting a narrow victory for the NO campaign I can see no reason why GBP/USD shouldn’t strengthen from here.

1.6286 is the 61.8 fib which will most likely send the BULLS back but this should only be temporary.

1.6320-7 area is likely to be tougher as this is the 200 sma.

The BULLS will need to break this moving average, return to it to test it and then drive north.

I’m LONG from 1.6051 as recommended on my website and LONG from 1.6137 as recommended on my Twitter feed.

My STOPS are both 1.6184 (+127 +47).


Just a quick note on the Scottish Referendum.

This will present a golden opportunity to make many pips. My website will be detailing the best approach as we nearer the vote but my plan would be to get LONG on the assumption of a NO vote.

The latest survey had 47.6% planning to vote YES against 42.4% planning to vote NO with 10% undecided.

Forget the YES and NO voters and look at the undecided.

Human nature dictates that if you’re are not sure about something - you won’t change it. Historically undecided voters nearly ALWAYS vote in favour of what they know rather than take a leap of faith and vote for an uncertain future. You can expect these 10% to vote 9/1 in favour of NO change which will lead to a heavy defeat for the YES campaign.

I expect the polls to widen in favour of the NO campaign over the next week.

A NO vote will send the GBP to the stars.

Be ready for it.

More on my website.

Its taken all week but GBP/USD has all but closed the gap from Mondays open. My GBP/USD LONGS were STOPPED out for +155 and +69. These STOPs were victims of market uncertainty before a new Scottish Referendum poll that revealed the gap between the YES and NO camp had narrowed on the face of it but its not how I saw it.

This poll gave strength to my belief that there will be a resounding NO vote come the 18th. The number of “don’t know’s” went from 10% to 17%. I’m fairly certain that these were YES voters who had shifted their position to neutral.

As a consequence I re-entered LONG GBP/USD at 1.6227 with a 30 pip STOP.

I fully expect the GBP to strengthen from here. I suspect that a NO vote will give GBP an inevitable boost but as the poll draws closer I believe the market is already factoring in this eventuality.

Should, however, there be a YES vote then expect Sterling to plummet.


GBP/USD is now supported by the 100 sma and is attempting to break down the 200sma.
The 1 hour 200 sma is arguably one of the most important indicators on any chart and BEARS will usually defend this line strongly. So far the BULLS haven’t been repulsed which suggests there’s more GBP strength to come.

Last weeks opening gap hasn’t been completely filled which also suggests there’s more to come from the GBP BULLS.


The DAILY 61.8 fib lies at 1.6285. If GBP/USD can defeat the 200 sma AND get through this fib. then we could see be seeing a substantial GBP rally.

If this position can be held into the early hours of Friday when we’ll know the outcome of the referendum, there’s no reason why GBP can’t return to 1.72 as long as we get a NO vote which is what I expect.

The 200 sma proved too strong for the GBP BULLS and price is now clearly being held down by it. We are however now in what I call an SMA squeeze. Here the 200 sma 100 sma and the 50 sma are all converging and they are in their “correct” order for a BULL breakout (50sma at the top 100sma in the middle and 200 sma below).

If the Scottish Referendum wasn’t on Thursday a LONG here at 1.6200 with a STOP @ 1.6155 (45 pip risk) could be attempted but its risky.


If the price can break the 200 sma on the 5m chart then return to it to test it and head back north it may be worth going long with a 15 pip STOP from 1.6200


What I’m trying to do here is get LONG BEFORE the Scottish vote and hopefully get a b/e trade in order to maximize the benefits of a NO vote.

As I’d hoped the price took out the 200 sma on the 5m chart and returned to “test” it. This is always a good trading signal if resistance turns support.


I entered this trade LONG at 1.6213 with a 35 pip STOP that I’ve now adjusted to 1.6224 for a 13+ pip gain at worst.

I’m hoping this is the start of some sustained GBP buying and I can keep this trade open until the results of the Scottish Referendum are known. A NO vote should accelerate this position by 100+ pips and we could then be looking at GBP heading towards 1.66 and above.


My GBP/USD LONG from 1.6213 is approaching an area of strong resistance. I’d like to hold this position into the Scottish Referendum but 1.6338 may prove too tough a barrier for GBP BULLS. The story is further complicated by a raft of numbers out shortly (Average Earnings, Claimant Count and MPC votes).
I think I’ll tighten the STOPS on this trade to 1.6280 (61.8 fib) or higher and see if the news is BULLISH.



GBP/USD LONG

STOPS moved to 1.6302 (+89)

Many times trading Forex you just can’t win. The numbers released at 09:30 ALL beat expectation and this should have boosted GBP BULLS, instead it sold off.
The only explanation for this has to be the Bank Rate Voting which I can only assume the markets were hoping for a another dove to leave and join the hawks. It seems a bit churlish that that was enough to weaken the GBP but there you have it and my STOP has been hit.
I’ll be looking to re-enter this market LONG possibly in the 1.6281 area if we get there. If the price doesn’t get that far then if the BULLS can clear resistance at 1.6338 and return to it and test it for support , i’ll look to BUY.


Over the last year, the run up to the mid-July high was full of peaks that were 700-900 pips above the 200-day moving average. Now that the price has fallen below the 200-day moving average, we are in a bearish situation. The price is only 530 pips below the 200-day moving average. I am only taking shorts so long as we are below that average. I am set to go short at a break below the current 3-day low of 1.6160. With that, I will groom my stop win-or-lose along the 3-day high till it is hit. If we get a long move lower I will stop grooming along the 3-day high when the 7-day high passes into profitable territory and follow it win-or-lose until it is hit.

It appears as if GBP BULLS are making another assault on the 1.6338 area.
The 61.8 fib has been cleared at 1.633.88 and the MA’s are widening as anticipated.


If the BULLS can clear 1.6338 and subsequently defend it I’ll go LONG with a STOP below 1.6338 in the 1.6330 area.

The last opinion poll on the Scottish Referendum gave the NO camp a healthy lead.

Price action suggested that the 1.6338 barrier would be overwhelmed by the BULLS so I went LONG at 1.6335 with a 12 pip STOP.


The news at 13:30 hasn’t hurt the GBP/USD so I expect this pair to head north for the foreseeable future.


Increasingly a NO vote is being priced into the market so when the result comes tomorrow morning I don’t expect a major move (unless its a YES vote).

There’s no reason why GBP/USD can’t recover 1.70 from this position.


1.6400 looks like a new resistance area that GBP BULLS will need to get past to make progress.

The price is currently held in an 80 pip range between former resistance now support 1.6339 and the 1.6400 handle.

I’m still LONG from 1.6335 with a STOP at 1.6338 (+3).

Price may meander between these 2 levels unless we hear any rumours or news.

If the trade is still alive by 7:00 tomorrow, the inevitable NO vote should send GBP past 1.6400 and towards higher ground.

Where next for GBP/USD?

My GBP/USD LONG from yesterday netted me 87 pips before profit takers took the price down to my STOP.

There is nothing to suggest that GBP won’t advance north again and this pull back is a good opportunity to go LONG.

An obvious place is the previous resistance turned support at 1.6340 area.


I’m LONG from 1.6346 with A STOP under all the support at 1.6314 for a 32 pip risk.

I’ll move this STOP once the 50 sma on the 5m chart has been cleared.


(please ignore the image below - this appears to be a bug in the image uploader)


Good trade for today, thank you.

Just a quick heads up on GBP/USD.

GBP has weakened considerably since making highs at 1.6523.

My LONG from support at 1.6340 has hit my STOP at 1.6314.
I was tempted to move this STOP down to 1.6280 but decided against risking 60 pips.

The 1.6286 area is interesting as this is a double fib meeting point. Its the 50.0 fib on the Hourly chart and the 61.8 fib on the Daily chart. Its also a known area of support/resistance.

I strongly suspect we are headed for this area but as we approach the close of play trading will probably slow.

If we get there before the close and the price doesn’t break 1.6286 then it may be worth getting LONG with a 15 pip STOP.

There’s a good chance GBP will open higher when we open for trading as traders digest the consequences of the No vote and thoughts return to the question of the BOE raising interest rates.