GBP/USD likely direction

[forexportal]

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1.4810 area could be the point of no return for GBP/USD.

All support has now been broken and still GBP sells off. I still believe that this sell off is not justified by the fundamentals and oversold conditions would suggest a move higher at some time but under 1.4810 there is clear daylight.

My LONG from 1.4920 made it to 1.5026 before being turned back so I exited for 70+ pips.

No news of any particular significance so we need to wait and see what happens when the BEARS drive the price down to 1.4810 if we don’t get a bounce before then.

I’m waiting to go LONG at 1.4810 if there is no break and shall assess a SHORT trade depending on how convincing the break is if we get it.

Above 1.4915 I shall look for LONGS.

[forexportal]

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Deciding on how any given Forex pair is going to move should be a mix of fundamental and technical analysis.

The inherent problem with fundamental analysis is that much of it is conjecture and opinion and for every analyst who believes GBP will weaken there will be another analyst who believes GBP will strengthen.

Clouding the issue are known eventualities like the anticipated US rate rise. Its coming. We all know its coming. It may be as soon as June. When it does we all know a stronger USD means a weaker GBP.

What we don’t know is how much of that weakness is already built in to the current exchange rate.

The old adage “sell the rumour, buy the news” may well apply when the US does raise rates and we see GBP recover and not weaken much further.

When we have confusion like this we need to go back to the technical picture. Technicals seldom lie.

GBP has sold off from 1.5550 right down to current levels at 1.4780.

The charts look out of balance. This sell off has been too aggressive and is not really supported by the fundamentals.

The H4 D1 W1 and M1 RSI’s all suggest we need to move higher to alleviate oversold conditions.

I’m back in LONG at 1.4793 with a STOP under todays open at 1.4753.

1.4863 will be the first hurdle (Weekly Pivot) if we get there.

There’s no news to get in the way of this trade and as GBP has a tendency to drift north during the London session in the absence of news, this trade may make progress.

[forexportal]

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MY LONG from 1.4793 was STOPPED at 1.4810 for a few pips as GBP failed to make it as far as WP at 1.4863 and after consolidating for several hours slipped back and fell further on London open.

I’m back in LONG again 1.4762 as GBP may be bouncing off MS2 pivot and today’s open just below. A tight STOP at 1.4740 means its a 22 pip risk trade.

I have to say that this trade is somewhat speculative and I’m not expecting much but if I can get it to b/e then like all trades you never know where it could go.

The market is somewhat subdued today with the events of tomorrow hanging over traders like the sword of Damocles.

Average Earnings, Claimant Count and MPC at 09:30 tomorrow then the big one at 18:00 - the FOMC Statement, Economic Projections and Federal Funds Rate.

This is going to be big.

We just don’t know how big and how the markets are going to react.

The markets have largely priced in a future US rate hike the question is when. The hot money is on June and if this is confirmed or suggested we can expect to see the USD strengthen across the board but it may be temporary.

Any suggestion of a delay until September will encourage USD BEARS and we could see significant moves higher on GBP and EUR.

STOPS on all trades should be mandatory some time before 18:00 tomorrow.

[forexportal]

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Yesterdays trade was a miss as prices drifted sideways and touched my STOP.

Todays the first round of GBP moving numbers came out and GBP was hammered. Average Earnings missed down to 1.8% , Claimant Count Change was as expected and no surprises for the MPC vote was enough for any GBP BULLS to beat a hasty retreat.

The BEARS look somewhat exhausted with oversold conditions on lower and middle time frames so we could see a minor bounce from these levels.

An entry at 1.4668 with a STOP below the move low at 1.4654 for a 14 pip risk is worth a scalp.

Ideally if we hit 1.4690 I’ll move the STOP to b/e and hope GBP continues north.

We are entering unknown territory today with the Chancellor on his feet at 12:30 with the Annual Budget and even more so at 18:00 with the FOMC statement which is almost guaranteed to be monumental.

NO trade that doesn’t have a STOP is safe.

It seems to be 50/50 whether we get a definitive rate call announcement today. Any suggestion of a June hike (which will be the first in 10 years) will have USD BULLS hitting the BUY button and we will see all USD dollar pairs move in favour of the dollar.

Any suggestion that there may be a delay in raising rates will have USD BEARS hitting the SELL button and GBP will accelerate north.

Hold on to your hats.

It could be white knuckle ride at 18:00.

[forexportal]

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Well, as expected, the release of the Fed Statement at 18:00 lit the blue touch paper.

Most analysts were looking for the dropping of the word “patience” in the statement signalling a possible June rate hike and sure enough the word was dropped. The net consequence of that would have been an immediate sell off of all USD pairs and we could have seen GBP/USD and EUR/USD in particular plummet.

Instead the market was thrown a curve ball and Chair Yellen added new guidance in the phrase “it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labour market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term”

So what this means is rates will be held until there are definitive signs of inflation heading back towards 2%.

This had an immediate USD weakening effect and the EUR, GBP, AUD soared and USD crosses fell.

Unfortunately for my trades these gains were unsustainable.

Hindsight is a wonderful thing and we all ask ourselves “why didn’t we close and bank” as we watch our profits disappear as the USD headed right back the direction it had just traveled whilst all the time we hope the retrace would slow and eventually the trade would turn back in our favour but it never does.

The most common error traders make is closing positions too soon. There is nothing more frustrating than closing a winning position only to see the trade push on for a further 100+ pips and it always seem to be a case of “damned if you do, damned if you don’t” as far as closing or keeping a winning trade.

Anyway - that’s trading so we move on and all my 3 main trades (BUY GBP/USD SELL USD/JPY USD/CAD) are still alive and currently in profit as there are signs the USD strength post FED sell off is weakening.

The fundamentals dictate that the USD SHOULD weaken post FED Statement.

If rate rises are now dependent on employment rises and unemployment falls AND inflation targets then this should breed uncertainty into the USD whose rise has been relentless for months.

The USD is overbought on many pairs on higher time frames.

We should see some easing of these positions over the next few weeks or so.

We are however always at the mercy of news and 12:30 will be interesting with the Unemployment Claims number.

If this misses we could see accelerated USD weakness.

If this exceeds we could see renewed USD strength.

Overall I’m dollar BEARISH, at least for now.

[forexportal]

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Yesterday I said I was largely dollar BEARISH with open positions LONG GBP/USD and SHORT USD/JPY and USD/CAD and nothing has changed.

The USD retraced more of its plunge following the FED statement but both my USD SHORT trades failed to regain Wednesday’s highs so I remain BEARISH.

Cable suffered again yesterday from comments from BOE officials and this looks increasingly like an engineered attempt to weaken the GBP.

Yesterday following on from Gov. Carney’s comments we had the BOE’s chief economist Andy Haldane suggesting rates could go either way thereby suggesting we could see a rate cut - something no-one believes will happen but it was enough to force any GBP BULLS return to the their stables.

From the chart above GBP is sat in the middle of a wide band of support and could go either way.

So far today GBP has meandered in a narrow 56 pip range and doesn’t look like its going anywhere in a hurry.

Switching off is probably best advice.

[forexportal]

A surge in volume has changed the picture across the board.

Over the last 3 or 4 hours the USD has come under intense pressure and this has sent all USD BULLS running for cover.

GOLD and SILVER have accelerated north as has GBP, EUR, AUD and NZD whilst USD/CAD, USD/CHF and USD/JPY are all falling.

As the repercussions of the Fed statement sink in this could be a game changer and the start of sustained USD weakness.

Overbought/oversold conditions on most USD pairs may now ease over the next few trading sessions or longer.

Monday’s open will be interesting.

[forexportal]

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So far this week the USD looks to be on the defensive after Sundays/Mondays open though obviously its only early.

My overall position (USD BEARISH) remains intact as USD/JPY and USD/CAD approach key levels.

Should we see further USD weakness throughout the day we may be on the threshold of a significant GBP/USD rally.

My LONG from 1.4759 now has a STOP at 1.4830 for +71 and I’m looking to add to this position once we’ve cleared today’s open at 1.4942.

No news today though ECB President Draghi is on his feet at 14:00 in fact this week see a number of talks with FOMC member Evans up at 10:30 Wednesday, FOMC Lockhart at 13:00 Thursday followed by BOC Gov. Poloz at 13:30 then on Friday we have morning speeches from Haldane and Broadbent from the MPC, Gov. Carney from the BOE, Fischer from FOMC and finally Fed Chair Yellen at 19:45 Friday evening.

Any of these speeches could move the market as we enter a period of increased volatility.

More tomorrow.

[forexportal]

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The CPI numbers released at 09:30 missed and this was significant. With UK inflation at 0.0% we are one step from deflation and we can expect the BOE to be increasingly dovish.

In normal circumstances this release would have seen a flood of GBP selling and this has not happened (yet).

The conclusion we can draw from this is that the market is maintaining a dollar BEARISH position which will make the CPI numbers out of the US at 12:30 particularly significant.

The forecast is for a 0.2% print. If this number misses (something it has done for the last 3 months) we could well see accelerated dollar weakness. Conversely should we get a print above 0.2% the USD could fly and resume its BULL trend.

I remain LONG from 1.4759 with a STOP now at 1.4887 for +128.

If US CPI misses GBP/USD could be heading for 1.5200 over the next few days.
If US CPI exceeds expectation then my STOP will almost certainly go.

[forexportal]

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UK CPI missed yesterday (0.1% exp 0.0% act) so the UK is one move away from deflation. This suggest we’re not in line for a rate hike any time soon.

US Core CPI yesterday was a 0.2% read against 0.1% expected so this immediately had the USD BULLS excited with the suggestion that could lead to an increased chance for a US rate hike.

The fact that GBP/USD hasn’t been crushed by these possible eventualities suggests the market is treading water and looking for direction.

Across the board the USD is in red numbers and this suggests the markets still favour further USD weakness.

I’m back in LONG on GBP/USD my STOP having been hit yesterday as expected.

I’m in at 1.4859 with a STOP under the open at 1.4825.

The 200 sma comes in on the M15 at 1.49 area so if GBP can ease past this hurdle we could be good to go.

Quite a thin news day with US Core Durable Goods in at 12:30 but we do have FOMC member Evans on his feet at 10:30 so we will need to keep an eye (or ear) on what he has to say.

[forexportal]

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I exited my LONG from 1.4859 at 1.4977 as GBP hit the 38.2 H4 Fibonacci and quickly retreated.

With the excellent Retail Sales numbers at 09:30 (0.7% act 0.4% exp) the pullback was an excellent opportunity to reload so I’m back in at 1.4924 as the Weekly Pivot is now supporting a push north.

We can expect some more BEAR activity as price attempts to regain 1.5000 but their position has been weakened by the initial surge and there’s a good chance we could break through.

The USD looks to be under pressure across the charts but we need to be mindful of the US Unemployment claims at 12:30.

[forexportal]

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The H4 Fibonacci 38.2 level is proving quite a barrier for GBP BULLS.

Yesterday despite excellent GBP Retail Sales numbers this level and a mood of USD optimism helped by the better than expected Unemployment Claims numbers was enough for GBP to sell off throughout the day.

GBP is now in a double downward channel but is heading north for an assault on the upper trendline which is in fact the middle leg of an Andrews Pitchfork.

A break of this channel targets another attempt on the 38.2 Fib at 1.4985.

I’m looking to get LONG again but current overbought conditions on M5 and M15 prohibit any entry.

A pullback to the 23.6 Fib at 1.4851 may provide an entry.

On Monday I highlighted a raft of influential speakers for the week but these have largely been inconsequential.

This is unlikely to be the case when Chair Yellen gets to her feet at 19:45.

What she says will most likely set GBP/USD’s direction (and the USD generally) for the next weeks trading sessions so you will need tight STOPS on all your positions.

[system]

[QUOTE=“forexportal;691822”]<img src=“301 Moved Permanently”/> Ashampoo� Web Upload The H4 Fibonacci 38.2 level is proving quite a barrier for GBP BULLS. Yesterday despite excellent GBP Retail Sales numbers this level and a mood of USD optimism helped by the better than expected Unemployment Claims numbers was enough for GBP to sell off throughout the day. GBP is now in a double downward channel but is heading north for an assault on the upper trendline which is in fact the middle leg of an Andrews Pitchfork. A break of this channel targets another attempt on the 38.2 Fib at 1.4985. I’m looking to get LONG again but current overbought conditions on M5 and M15 prohibit any entry. A pullback to the 23.6 Fib at 1.4851 may provide an entry. On Monday I highlighted a raft of influential speakers for the week but these have largely been inconsequential. This is unlikely to be the case when Chair Yellen gets to her feet at 19:45. What she says will most likely set GBP/USD’s direction (and the USD generally) for the next weeks trading sessions so you will need tight STOPS on all your positions.[/QUOTE]

Not sure why you’re going LONG seems that the flow is down.

Your comment about Andrews is a bit off as you’re using a frequency line to describe price. The pitchfork would be set up differently.

I have orders at the 382 line you mentioned to short this market.

Cross our fingers.

[forexportal]

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Trendlines channels and pitchforks are all in effect trendlines.

In the Daily chart above any line drawn between connecting candle tops or bottoms is a trendline. When setting up your charts you should always look for channels rather than just trendlines so the lines A & B form a nice channel on the chart.

A much underused charting feature is the Andrews Pitchfork which is an extension to a channel and named for obvious reasons in that it has 3 legs or arms.

In the example above the channel A - B has been extended to C with a pitchfork. This third arm of the pitchfork may or may not come into play but should GBP/USD break higher its always worth marking on your charts an area that may come into play at a later date.

Another rare feature on this chart is a Daily Master Candle.

A Master Candle is a candle that has 8+ (some say 4+) successive candles that are traded within the range of the Master Candle.Master Candles can present highly significant trading opportunities as a break of the candles range (1.5164 - 1.4634) can often lead to strong push in the direction of the break and can set the direction of several trading periods.

As far as GBP/USD current direction, as can be seen the overall trend is down but GBP has yet to retreat from the upper trendline (B).

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On the H1 timeframe we can see that GBP is in quite a well-defined flag that is middled on the Weekly Pivot and bound by WR1 and WS1 Pivots.

WS1 Pivot is at 1.4788 and WR1 Pivot is at 1.4986 so this a very narrow 200 pip range.

All the signs are that price could break out of this range this week and the break could be quite aggressive when it comes.

Whether we see the break before Fridays NFP numbers remains to be seen.

The picture is quite muddied at the moment made worse by conflicting fundamentals.

Sitting on the side lines might be the best advice currently.

[forexportal]

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GBP/USD remains in its downtrend and yesterday punched through the WS1 supporting pivot but support from Monthly S2 pivot halted further moves south.

Today the Current Account missed like it always does but the Final GDP was revised up to 0.6%. So far this news has had little impact on the market and GBP/USD remains weighed down by uncertainty.

With no clues from the RSI which continues to trade inside acceptable levels GBP’s immediate direction remains uncertain.

We are still in a long term down trend but where we go between now and Friday is anyone’s guess.

LONGS look as risky as SHORTS currently so I’m staying away unless we get some increase in volatility and we start to see a more meaningful move.

All eyes on 13:30 Friday which could be electric with it being a Bank Holiday and NFP day.

[forexportal]

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Trading Forex is both predictable and unpredictable at the same time which is why trading successfully can be so difficult.

You should always be watching the charts closely when the price reaches a known level like yesterdays high and yesterday’s low.

1.4870 marked yesterdays high and at 3 o’clock, 4 o’clock and 5 o’clock yesterday (roughly) the price returned to this level only for the BEARS to drive the price south. Had you been around at that time in the morning it would have been predictable that having failed to break this level on 2 occasions, the third attempt was most likely doomed to fail.

At 09:30 today we had the UK Manufacturing PMI numbers which met target at a respectable 54.4. Any number above 50 indicates expansion so a 54.4 read is very healthy.

In normal circumstances you would have predicted that these numbers would boost the GBP.

What happened?

It sold off spectacularly.

This is the unpredictable nature of trading. Had we had an unexpected market moving announcement from a central banker or some unscheduled comment from the BOE you could explain this rapid sell off in the GBP, but there was none as far as I’m aware.

The USD simply strengthened across the board and dragged all USD crosses down.

Moves like this are generally down to volatility and there are signs that market volatility is increasing so traders need to be mindful and be extra cautious when placing trades and stops.

As far as where we’re going today with this pair I’ve just gone LONG on the strength of the nice doji on the H1 that closed at 11:00. This area coincides with yesterdays low and and the low from the previous day so I’m in at 1.4764 with a STOP under the low at 1.4736 for a 28 pip risk.

US ADP Non-Farm Employment Change up at 13:15 and ISM number at 15:00 will no doubt have a bearing.

[forexportal]

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My LONG from 1.4764 was closed after GBP failed at the 200 sma and I exited at 1.4847 for 80+ pips.
The bounce from WS1 was tradeable but I missed the entry so now I’m waiting to get LONG again.

The poor Construction PMI numbers set GBP BULLS on the back foot for most of the morning but that effect is now dissipating and the BULLS could be gaining ground.

Tomorrow will be a hugely significant day for traders. The Non-Farm Employment Change numbers due at 13:30 could be the most important data release so far this year.
Historically the April release of the March numbers miss more often than any other month.
Already we’ve had a sub 200k miss for the ADP Non-Farm Employment Change (released yesterday) and an ISM miss also released yesterday.

247k is the anticipated number. Many are saying this is more likely to be 220k and some analysts are predicting a sub 200k read.

If this happens the USD will plummet. USD/JPY will lose 150+ pips in a heart beat and GBP/USD will accelerate north.

The USD is heavily overbought particularly on the highest time frames on the AUD,EUR, CAD and JPY and these could seriously reverse as the chance of a US rate hike this year recedes further.

This, however, is speculation and we simply don’t know what the numbers are going to be and they could yet beat expectation which would alter the picture dramatically.

We need to be ready for all possibilities.

A LONG GBP/USD position well in profit by tomorrow with a b/e STOP would be perfect.

Also remember tomorrow is a Bank Holiday and many traders will not be at their desks so there is an increased volatility risk.

[forexportal]

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The dismal NFP numbers on Friday have now been largely discounted as we return to normal trading and the markets appear to back in dollar buying mode.

All the loses made by the USD against the GBP, EUR and JPY have been reversed and there is no immediate sign that the sell is stopping anytime soon.

The UK Services PMI print that was better than expected has been completely ignored and now we wait to see when this sustained selling will end.

1.4791 is WS1 which could be a buying area and 1.4820 area offers possible trendline support.

We need to sit and wait to see what happens over the next hour or two to see if we can gauge whether this GBP sell off continues and the overall downtrend resumes or whether this is a post NFP retrace and GBP is headed higher.

[forexportal]

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GBP would appear to be heading back north having bounced off 1.4800 support.

The area 1.4980 -1.5000 is key to GBP’s advance. 1.5000 has held up GBP’s progress north since the middle of March and a break would be significant.

I’m LONG from 1.4890 (and from 1.5070) and I expect 1.5000 to be targeted by GBP BULLS.

The dollar index has been falling so far today and there are tentative signs that the USD is coming under pressure. This is long overdue. The poor NFP numbers have put the chance of an early rate rise on the back burner and the USD is overbought on too many time frames across too many pairs.

A correction is coming and it could come any time.

There’s no more meaningful news due so this trade has a clear run until 19:00 when we get the minutes of the March FOMC minutes.

These minutes could be a game changer and anything dovish for the USD could see a shift in sentiment.

Selling the dollar against any pair with a tight STOP could pay handsomely.

[forexportal]

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The Cable sell off continues from yesterdays high and we’ve arrived at a popular reversal point for GBP the Weekly S1 pivot.

We may get a bounce from this area though we could move down to the trendline support at 1.4760 area.

A break through these 2 points opens the way for the 1.4738 low from 1st April. Further declines from there would suggest the decline from 1.5549 had resumed and would threaten the 1.4632 low.

For now though the price is clearly sideways as shown by the ascending flag but the technicals are under permanent threat from the fundamentals and the shadow of the US rate rise and the up and coming UK General Election.

Difficult trading days these. There’s much volatility in the market and we’re likely to get large swings in the market from nowhere.