GBP is holding above the Weekly Pivot and is well supported.
I’m adding to my LONG and I’ve opened another position at 1.5168 with a STOP at 1.5153 for a 15 pip risk.
My initial target is 1.5247 which is the WR1 pivot.
Every trader should have a set of rules when trading. These rules will prevent a trader firing off trades on “intuition” rather than solid analysis.
That said sometimes a position just looks right and you have to bend those rules on occasion and you just have to have a punt if the cost is small - Forex trading is after all gambling and you can’t win if you’re not in it to win it.
Yesterday was a case in point.
With my previous post I’d just gone LONG from 1.5168 with a 15 pip STOP.
At the time the charts suggested GBP would move higher although the conditions for the trade were not ideal, particularly as yesterday was a holiday in the US so volumes were thin and you frequently get “irrational” price movements.
No sooner had I posted my trade than GBP reversed sharply and I was out for a 15 pip loss.
Over the Asian session GBP lost further ground as it frequently does but in the small hours as the price approached WS1 buyers returned and currently we’re past the point where I went LONG yesterday.
As the price is bang up against W.P. and the 50.0 Fib on the M30 chart and the 200 sma is hovering just above the BEARS have halted this strong BULL run but my guess is we are headed higher which is what I expected yesterday.
I’m already in this market at 1.5159 with an open STOP as in the absence of news I’m looking for G/U to head for 1.5247 (WR1) over the next few trading sessions and GBP is likely to consolidate over the next few hours but may drift lower before it heads north.
GBP is rallying strongly across the board apart from GBP/CHF where its consolidating but GBP/JPY look as if it may be headed for MUCH higher ground possibly 181.40.
I shall update this if we have any further developments.
Yesterday my LONG from 1.5159 made it to 1.5200, consolidated but failed on a retest of that level. I closed the position at 1.5176 so just the 17 pips yesterday on G/U. More dramatic was GBP/JPY which surged strongly north only to run into WR1 where it was sent back to where it had come from.
Although GBP largely rallied across the board its clear that there are still more sellers than buyers in this market and all GBP LONGS need tight STOPS.
Today with Claimant Count and Unemployment Rate coming in better than expected in normal circumstances this would have given GBP a boost but the news that the 2 MPC hawks had abandoned their stance and decided to vote against a rate hike severely dented all GBP crosses.
Currently the market appears to be digesting this volte-face and deciding direction.
Key seems to be triple bottom at 1.5076.
I think if this level remains intact then the BULLS may assume some level of control. A LONG from here with a STOP below 1.5076 may pay off but its too risky for me so I’ll wait and see where we go over the next 2 hours or so.
US Building Permits at 13:30 probably wont shake the market very much but anyone looking at GB/CAD will need to be mindful of significant CAD news at 13:30 and again at 15:00.
GBP/USD continues to be held in a reasonably narrow range between 1.5265 and 1.5033.
Price is currently taking on WP at 1.5161 and clearing and holding above here looks a decent set up for GBP BULLS.
I’m already in this market from 1.5159 with an open STOP.
The 13:30 ECB conference could be monumental for EUR but its difficult to see how this will impact on GBP/USD.
I’ll be getting my STOP to b/e before 13:30 as apart from the ECB we also have USD Unemployment Claims which may have an impact.
LONG from here (1.5156) for those who want to be in this market looks reasonable with a STOP under todays open at 1.5142 for a 14 pip risk.
Good luck!
Generally speaking there are 2 type of news events. Predictable and Unpredictable.
A predictable news event would be for example UK Retail Sales where in most instances a bad reading is bad for the currency and a good reading is good for the currency. Its never quite as black and white as that as the strength of the current trend will impact on the consequences of the numbers and that needs to be factored in*
(*see below)
Unpredictable news events are statements usually from Central Bank governors that impact a currency in an unpredictable manner.
Yesterdays announcement from the ECB resulted in a 239 pip sell off in GBP/USD, crashing through all support and breaking through the channel floor at 1.5031 previously mentioned.
Even allowing for the downtrend GBP/USD has been in since July of last year its difficult to understand quiet why the BULLS capitulated in such a spectacular manner on G/U especially when you see the GBP strength in the sell off in EUR/GBP.
It says much about the weakness of the EURO.
My LONG yesterday from 1.5159 made it to 1.5211 where I put a 25 pip trailing STOP in anticipation of the up and coming news.
It is always tempting to chase a sell off like we had on G/U but its a high risk policy and these trades only look good in hindsight and are best left alone.
So where to from here.
1.4957 just below WS2 would appear to be a temporary floor and the BULLS may attempt to regain some ground from here.
So although we could see a move north from here to relieve oversold conditions the long/medium term target for G/U would appear to be 1.4805 where we would have a triple bottom.
Today’s stellar Retail sales numbers which massively exceed expectation at +4.0% against -0.6% expected
would in normal conditions have sent GBP to the moon.
This has not happened which tells you how much the BEARS are in control of this market.
If GBP can regain the 1.5000 handle and stay above it I may look for a LONG position but as its Friday it may be better to let the markets absorb the events of this week and see what Monday brings once the result of the Greek General Election are known which could blow the Euro out of the water permanently.
Sunday sees the Greeks heading off to the polls to elect their political leaders.
Currently the Syrzia party are ahead according to most poles published.
A Syrzia party win will send the currency markets into a frenzy.
The effect on the EURO would be catastrophic and could signal the beginning of the end of the single currency.
The EURO could suffer a third rout coming just after the SNB decision and Draghi’s QE program and fall to the next area of significant support at 1.0750 area.
If this happens it seems likely that GBP will follow suit and plunge.
Anyone with positions open on any trading pairs will need to have tight STOPS in place when markets open Sunday evening.
The EURO sold off on open as news of the anti-austerity Syriza general election win was absorbed.
Since then markets have steadied and news that the SNB may have intervened to weaken the CHF has sent CHF cross pairs soaring.
The impact of the Greek election result will not be known any time soon. It has the potential to call into question the very existence of the single currency but for now the markets are calm and trading is getting back to normal after a tumultuous January.
So back to GBP/USD.
Currently GBP/USD is being held below the 200 sma on the 15M time frame and will need to cross this hurdle to advance though the BULLS have regained 1.5000 handle and price is staying above.
The Weekly Pivot lies just above.
On the WTF the oversold conditions remain extreme but the DTF oversold level now stands at 32 on RSI so its appears we may be headed higher which is why I favour LONGS with tight STOPS as we need a close above 1.5268 to break the downward channel that GBP has been in since July of 2014.
I’m currently LONG from 1.5037 with a STOP I shall manage actively.
There’s no significant news today and GBP/USD has a “treading water” feel so its unlikely to be going anywhere at speed but we may see a pick up in activity when the US opens for business in an hour.
So far so good on my GBP LONG from 1.5037 which is currently +31.
There’s resistance coming in at 1.5078 which will hold up the BULLS advance but this should only be a temporary hurdle as any retrace should be held by the Weekly Pivot which will act as support.
If the price pushes through the WP then I shall close the trade.
1.5150 is my initial target but we will need favourable Prelim GDP numbers tomorrow to get there.
This morning I moved my STOP from my GBP LONG from 1.5037 to 1.5068 as the Prelim GDP numbers were due to be released.
The print disappointed and GBP/USD quickly shipped 40 pips and took me out of the market for a 31+ pip gain.
The BULLS halted the push down at the 200 ema on the M15 TF and GBP/USD is currently recovering lost ground.
Its a bit early to say who is in control of this pair currently and we may see a bit of back and forward action before we can say with any certainty which way this market is going.
Poor GDP numbers would have generally led to sustained GBP selling in a BEAR market and this has not happened which suggest the BULLS may win out.
Also the RSI on the Weekly TF has just jumped from 18 to 21 so still oversold but heading back to 30.
Once we clear the 200 sma on the 1M chart I shall look to go LONG with a STOP below.
In my earlier post I said that I thought that the overall lookout for G/U was BULLISH and I was waiting for a cross of the 200 sma on the 1M chart to enter LONG.
That happened earlier and I got in at 1.5090.
We are now at a level not seen for sometime on GBP/USD - the WR1 Pivot.
This should present a real test for GBP/USD but if the BEARS fail to defend this level we could be headed much higher initially to 1.5208 (last high) and after that 1.5308 (23.6 Daily Fib).
The overall outlook looks reasonably bright for GBP BULLS so hopefully this trade may make decent progress.
Trading Forex is frequently less about fundamentals and technicals and more about pattern recognition.
A frequent pattern seen across charts is move, retrace, consolidate, move again pattern.
When I look at trading charts I see a constant battle between BULLS and BEARS and it helps to understand what is going on if you think of these battles as real and imagine these battles not on a chart but on a battlefield.
Yesterday my LONG from 1.5090 made it to 1.5222 at which point the BULLS became exhausted and had to give back some ground to the BEARS. I had anticipated the usual overnight GBP sell off and moved my STOP to 1.5167 for 77+ pips.
I see the BULLS advancing most of the day with the BEARS overwhelmed and being forced further and further back into their own territory. However, the further the BEARS are driven back the more the BULLS become extended and eventually they weaken to a point where the BEARS assume control of the battlefield and drive the BULLS back.
At this point though the areas of resistance that they have conquered becomes areas of support and eventually we reach a stalemate where the BULLS haven’t the strength to move north but the BEARS haven’t the strength to push south.
So we have a period of consolidation.
Am period of consolidation ABOVE an area of support means that the BULLS are gathering strength readying for a further push NORTH.
All the BEARS can do is possibly resist this move for as long as possible but eventually without help from resistance above its likely they will have to concede ground and hope that the next BULL charge is halted at the next area of the battlefield where the BEARS may put up sterner resistance.
So in the case of this trade, we know the BULLS were last halted at 1.5221 which coincides with historical resistance so we know this area is strong for BEARS.
This will be the first major hurdle for this trade but if the BULLS can break through 1.5221 then 1.5267 is the next area where the BEARS will resist.
As long as WR1 resistance turned support holds then the BULLS remain in control but if moves north are easily stopped by BEAR resistance then the BEARS will sense weakness and overwhelm the BULL positions and drive the price south.
This morning I flagged the 1.5220 area as being a strong area of resistance and GBP/USD made it to 1.5218 and the BEARS stepped in.
So far they have failed to drive the price back further than 1.5184 and the 5m 200 sma lies just below helping to support the BULLS.
My LONG from 1.5189 is back at the entry more or less so now we have to see whether the BULLS can hold the BEARS and then drive north to take out the 1.5220 level.
The 1H chart looks a bit “toppy” and we’re developing a head & shoulder so we may see GBP fall from here so I’m ready to exit this LONG at any minute if we don’t make progress.
In fact as I type this, I don’t like the look of the price action and I’m out with an 11 pip loss.
I’ll look to buy back when GBP has found some better support probably in the 1.5135/1.5140 though its unclear how far the BEARS will drive this move.
Much of trading is intuition that comes from experience. It cannot be taught. In order to be a successful trader you have to put the hours in. Since I started trading in 2005 there has hardly been a day when I haven’t studied a chart. At the weekend when there is no trading - I study charts. Not religiously but all traders are constantly looking for the “holy grail”, the method/system/approach that guarantees winners.
However, like the Grail - it doesn’t exist of course, but still we look.
Yesterday was a case in point. I was LONG GBP/USD but it looked wrong. I described the 1H chart as looking “toppy” which means the price appeared to be hanging over a cliff and looking exposed. I could explain further if that doesn’t make sense but you’ll have to check out my website when its been redesigned to fully understand.
Anyway the decision to exit the trade for a small loss at 1.5178 was the correct one as price tumbled to 1.5110 before the BEARS were exhausted.
The shape of GBP/USD now looks far healthier. The overbought conditions have been relieved and the price is now supported by the 200 sma on the 1h chart.
Weekly R1 and Monthly S3 resistance lie above but these have been compromised over the week and will not be as effective in halting a BULL move north.
I’ve just gone LONG from 1.5134 with a STOP at 1.5101 for a 33 pip risk.
Yesterday I never got the chance to comment on the FOMC statement which was mildly dovish as anticipated. This should in theory have helped all USD SHORTS but there was no immediate reaction.
I believe traders are adjusting their positions away from the USD somewhat on those crosses that have suffered through January which means we could be seeing EUR/USD and GBP/USD head higher.
Last Friday I suggested that the Friday low of 1.4951 may be the point where GBP/USD begins to make a meaningful move north.
Its a bit early to confirm that thought but the signs are favourable.
A break and close above 1.5267 will be needed to confirm a trend change.
The BEARS were well in control of G/U yesterday with all support collapsing and the 200 sma smashed through without a breath.
All this went somewhat against the fundamentals which suggested we may see a session or two of dollar weakness post FOMC.
My LONG from 1.5134 made it to WR1 ast 1.5150 but was sent south so I gave up the trade once it had moved past my open.
I’m still looking at the pullback as a BUYING opportunity and I’m back in LONG just above the Weekly Pivot at 1.5059 with a hard* STOP at 1.5060 (+1).
(* a hard STOP is one that will only ever be moved up for LONGS or down for SHORTS)
The 1H chart has a more balanced look and if we can clear the 200 sma on the 1H chart this trade may make progress.
At least its a free trade from here and should survive until 13:30 when we get the US Advanced GDP numbers.
The 2 areas of maximum interest on my charts are Weekly Resistance 1 and Weekly Support 1 known as WR1 and WS1.
10 days ago (Friday 23rd January) the BEARS drove GBP/USD down to WS1 and beyond at which point the BULLS mounted their charge.
In the past I have described the price action of any Forex pair as being like a battleground. In order for the BULLS or the BEARS to make progress they have to take on and defeat pockets of resistance like areas of S +R. fibonacci, moving averages in order to take out the grand prize which is WR1 and WS1.
All too often charges by one side or the other are defeated at these critical areas which is where the bulk of the opposition forces wait.
In the chart above, the BEARS attack on WS1 was too much for them and they were driven back to WR1 (Tuesday) where reinforcements halted the BULL charge and the BEARS drove the attackers back.
Another effort to break WR1 (Wednesday) was similarly repelled and this effort proved too much for the BULLS who capitulated and G/U sold off for the rest of the week.
Significantly though the BEARS failed to drive the BULLS back and past their previous victory at 1.4925 and the BULLS pushed north again from 1.4988.
The 200 sma has so far been a bridge too far and the price has retreated and we now stand at 1.5016 (10:17) where it looks as if the price is poised to head either way.
I shall look for LONGS as long as we remain above WS1 and 1.4952 low and I’m already in this market following the slightly better than expected Manufacturing PMI numbers though G/U has sold off in the last 20 minutes so I’m watching this trade and I shall exit on signs of further GBP weakness.
Heavy news week this week with all the PMI numbers out of the UK, MPC Thursday and of course the big one on Friday - the Non-Farm Employment Change and Unemployment Rate out of the USA.
The BEARS remain largely in control of this market but appear insufficiently strong to push past previous levels.
Better than expected Construction PMI numbers are helping GBP BULLS but its hard going.
The double bottom at 1.4987 is supporting moves made north by the BULLS but they look like they may give ground at any areas of BEAR resistance.
As long as we remain above 1.4974 WS1 and 1.4950 (previous low) I remain short term BULLISH.
MY LONG from 1.5073 is still in play with an open STOP.
1.5077 (200sma H1 chart) will be a major hurdle for GBP BULLS and the Weekly Pivot at 1.5098 is also strong.
Above 1.5100 opens the door for a test of 1.5184 (Monthly Pivot) and 1.5207 (WR1).
My LONG from 1.5073 survived some scares but eventually took off and crashed through all the major hurdles put in front of it but stalled at the critical Monthly and WR1 pivot.
The price is also in overbought territory.
The price hasn’t actually hit WR1 yet though the Monthly Pivot has so far been enough to hold up the BULLS.
Good news for GBP BULLS is that the BEARS have only been able to push the BULLS back to 1.5138 and this level has been tested and held which is key.
I expect we are going higher. My 1.5073 was eventually STOPPED at 1.5145 for a nice +72 pips so I’m now waiting for an opportunity to get back in LONG again.
With the Services PMI numbers coming in above expectation I expect to see GBP/USD consolidate for the next few hours before a move north.
There is a high probability that the price may drift lower and wait for the 200 sma on the 1 hour chart to drift higher.
The price will almost certainly head back towards the 200sma over the next few sessions but its tricky to determine when this will happen.
I’m as certain as I can be that we’re headed higher but I don’t want to be on the wrong side of a correction so I’m not in this market until I see RSI come down under 70 on the H1 charts.
I’ll post a follow up if I think we’re getting close to that point.
In my last post I stated that I was looking for a pullback in order to get LONG on GBP/USD.
This has not happened and G.U has powered ever upward disregarding overbought conditions on multiple time frames.
Ever since the price moved away from 1.4954 I have been suggesting that we may be in the process of a trend reversal. This is the reason I have only gone LONG on GBP/USD for the last week or so.
Trend reversal are obvious in hindsight but then trading is easy in hindsight.
Previously I posted that a break and close above 1.5267 could confirm that GBP is changing direction rather than going through a medium term retrace.
There are key hurdles ahead. 1.5259 area is the 200 day sma on the H4 TF.
1.5267 is the previous swing high
1.5310 is the 23.6 Monthly Fibonacci.
Should GBP/USD clear all these hurdles and stay above them on close then we could be headed for significantly higher ground at 1.5600 and above.
Much will depend on Fridays NFP numbers but a weak print could accelerate these gains.
The GBP is looking strong across the board but chasing these moves would be folly.
Wait until we get a substantial pullback and look to get LONG possibly in the 1.5180 area with a tight STOP.
Yesterday GBP/USD made solid progress but overbought conditions and the risk of a pullback made picking an entry fraught with danger. Strong moves are hardly ever worth chasing unless you’re prepared to risk an excessive STOP so its nearly always better to stay out of the market until o.b. conditions are relieved and a more defined entry is clear.
I was looking for a pullback in the 1.5180 area but G/U retraced to 1.5164 which would have been a nice entry but it was late in the day and the risk of a further sell off in the Asian session made this entry unfavourable.
So far this morning GBP/USD has advanced strongly but again we’re left looking for an optimal entry.
The problem now are the 3 significant areas of resistance at 1.5246 1.5269 and 1.5308.
Currently we are at 1.5333.
Should we pullback to 1.5207 (WR1) I may look to go LONG with a tight STOP below.
I’m as sure as I can be that GBP is headed for higher ground so I’m only looking for LONGS but much will depend on the US Trade Balance and Unemployment Claims at 13:30 and of course the critical NFP numbers tomorrow.
Ideally I will find a LONG GBP/USD that I can get to break even a.s.ap. and wait to see if the numbers out of the USA disappoint as I expect.
This morning I mentioned 3 areas that GBP/USD would have to clear to advance higher.
1.5246 and 1.5269 have been safely negotiated but the BULLS have come up against stern resistance at 1.5308 as GBP BEARS defend the 23.6 Monthly Fibonacci.
I expect GBP will pullback here possibly to 1.5256 where the 5m 100 sma coincides with the 61.8 5m Fibonacci.
1.5250 is also a level worth noting.
Best approach is to let GBP drift lower from here and look to get LONG lower down.