Its hard to see anything BULLISH about GBP/USD.
All the signs are pointing to further weakness.
No direct GBP news this week but USD New Home Sales, Core Durable Goods, CB Consumer Confidence, GDP, Unemployment Claims and Pending Home Sales will all affect GBP/USD short term direction but overall the direction is bearish.
GBP/USD Trade suggestion.
SELL @ 1.6678 STOP 1.6720
BUY @ 1.6479 STOP 1.6435
Please check the website for instructions on how to use these signals.
Be mindful of news.
If these targets are broken at news time you will have to watch the price to see if these levels will reverse.
There is no significant GBP news on the calendar this week but there are plenty of USD news releases.
In particular watch Prelim GDP and Unemployment claims on Thursday at 13:30
GBP/USD 25th August - 29th August
GBP has steadied the ship over the last week but formidable hurdles lie ahead for GBP BULLS.
This is a GBP news heavy week with the PMI numbers out (Manufacturing PMI Monday, Construction PMI Tuesday and Services PMI Wednesday) as well as Asset Purchase, Bank Rate and MPC Statement Thursday.
If this spread of news is on balance BULLISH expect GBP/USD to head for 1.6677.
There is formidable resistance at 1.6677 and SELLERS will be waiting to pounce. This area coincides with the 200 sma on DTF, previous resistance and the Weekly R1 pivot.
If GBP/USD breaks through 1.6677 and stays above it then GBP BULLS may well have resumed control of the pair.
If on the other hand GBP news misses and price is taken through 1.6530 then we are looking at 1.6286 support.
I shall update my analysis after 09:30 Monday after the Manufacturing PMI numbers.
As I post this we are 30 minutes before the UK Manufacturing PMI numbers.
1.6678 is a key area for GBP/USD. The 200 day sma comes in here on the daily time frame. If UK Manu PMI beat target this resistance could break. In order to trade this, best advice is to see what happens when the price reaches here. If the price surges through then wait for a pull back to the 50 sma on the 5m chart and if that holds then go long with a STOP at 1.6670.
If the PMI numbers miss then look to buy GBP/USD if the price hits 1.6545 with a STOP at 1.6525.
The UK Manufacturing PMI numbers missed but GBP/USD appears to be consolidating above the 200 sma on the 1HTF. My guess would be the price will drift higher. Best advice stay out of the market until we near 1.6670+ area and see what happens.
Price has found support at Fridays high and is moving north. LONG from here (1.6612) with a tight STOP (1.6602) is worth taking. Target would be resistance at 1.6672
With CAD and USD on Bank Holiday volumes are thin and trading is slow.
This speculative GBP/USD long is treading water and has threatened the STOP at 1.6602 but is now moving north again.
Its impossible to work out GBP/USD’s direction though I still favour LONGS.
Overnight GBP BULLS have had to retreat in order to push north.
I adjusted my STOP on my GBP/USD LONG for -5 pip loss.
Depending on what happens at 9:30 when GBP Construction MPI number are released I’ll either look to go LONG with a favourable number or wait for price to either hit 1.6545 support and look to go LONG here or see what happens as price hits the 76.4 fib where the BEARS took control yesterday. If the 76.4 fib is taken out 1.6672 is the next area of strong resistance
Its never a good sign when positive news leads to a currency selling off.
This morning the Construction PMI numbers came out at 64.0 against expected 61.5.
This would normally have been good for a 60 pip bounce at least but after a short trip north the GBP/USD sold off.
This tells you how weak the GBP is currently.
1.6502 offer some support. If prices bounce here and can break and hold above the 200 sma then I’ll look at going LONG.
The relentless 12 month move of GBP/USD from June 2013 to July 2014 has clearly stalled at 1.7189 and is in retreat.
The move was 2383 pips and 723 of those pips have been given back.
GBP/USD is now at the last chartable support point before the 61.8 fib at 1.6282
The MACD and RSI (oversold) suggests GBP may make a move north from these support levels. If the Services PMI beat expectation GBP may gain ground but the fundamentals with a possible Fed rate increase around the corner will limit any gains.
The market may tread water until tomorrows key Asset Purchase and MPC rate statement but GBP is looking mildly bullish so far this morning
LONG here at 1.6482
STOP 1.6458
Risk 24 pips.
Here’s a quick lesson in trendlines.
I’ve been trading since 2005 and I quickly discovered the magic of trendlines.
Take any chart on any time frame and you will find trendlines. I find trendlines to be the most amazing feature of trading. They can confirm or negate a trade and have no logical explanation other than harmonics. The website I’m developing will have a large section on harmonics as they can be key to understanding price movement.
I refer to trendlines as “honest” or “dishonest”.
A dishonest trendline is any 2 points on a chart as below.
2 points on a trendline is unconfirmed. There’s a good chance that this trendline will be touched again sometime in the future and if it does it will become “honest”.
If it doesn’t then its just a line on the chart.
Analyzing GBP/USD today we have the formation of a potential honest trendline. I say potential as we don’t yet know if this 3 touch of the trendline will hold.
If the price does indeed move north from this line and GBP strengthens we can keep this line on the chart and if at sometime in the future, GBP resumes its downward direction (which is likely) we will need to see if the price bounces from the line or goes through it.
If the line fails then we can look to SHORT GBP/USD.
If price bounces then we can look for a LONG position.
LONG from 1.6482
STOP adjusted to 1.6440 - risk now 42 pips.
Worth extending the STOP on this trade with MS1 and potential trendline support.
RSI on lower timeframes very oversold.
STOPS.
Getting the STOPS right on a trade is a difficult skill. Sometimes the STOPS are obvious and you can get away with a 10 pip stop if the price has reached a support/resistance line but if you are in a support/resistance area then you need to adjust the STOP depending on what the market is doing.
Yesterday I went LONG GBP/USD 1.6482 with a STOP at 1.6458. The trade went against me and it was clear that 1.6458 was going to be hit. At this point you have a choice. Do you let you STOP be hit or if there is a support area further down, let the price hit that area.
As a further support area lay 20 pips beneath 1.6458 I reset the STOP to 1.6440. Price continued to head south but the price action suggested that the BEARS were weakening and the BULLS were gathering strength.
Beneath 1.6432 there was no further support so that became the line in the sand for this trade so I changed the STOP to 1.6432
Over the last 16 hours the price has moved away from the trendline support leaving a definite STOP are at 1.6437.
So my GBP LONG from 1.6482 has definitive STOP at 1.6438 for a 44 pip risk which is more than I usually use but sometimes a bigger STOP cannot be avoided.
Today is a news heavy day for the GBP with Asset Purchase Facility, Official Bank Rate and MPC Rate Statement coming in at 12:00 followed by USD Trade Balance and Unemployment Claims at 13:30 followed by USD ISM numbers at 15:00.
These are all certain to set GBP/USd moving in one direction or another until we wait for the big one tomorrow - Non-Farm Employment Change and Unemployment Rate which will set GBP/USD direction for the foreseeable future.
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.
