GBP/USD LONG from 1.5654 now at break even.
Predicting where GBP/USD is headed over the next 2 hours is impossible so I’ve set the trade to break even so that its a free trade.
Luck is now needed if the trade is going to make any more progress.
Should we get a spike up I shall move the STOP up accordingly.
Stop 1.5669 (+15)
STOP moved back to just better than break even.
Very confused picture on GBP/USD.
Yesterdays LONG from 1.5654 made it to 1.5719 just short of the Fib level and then headed south. I exited at 1.5700 when it was clear no further progress north was likely.
Trades today will depend on where we go over the next few hours.
I’ll look to go LONG if we drop to 1.5619 (yesterdays low) or if price takes out 1.5690 and hold above it.
GBP is currently like a boxer that gets to his feet only to be knocked back down to the canvas but as long as we stay above the critical 1.5589 then we have to assume GBP is more BULLISH than BEARISH.
On the 4H chart GBP/USD is possible developing a “cup” pattern which would suggest we’re going higher over the mid term.
Whether this is the case will depend on 1.5589 holding.
Yesterday I said I would look for LONGS from 1.5619. We almost got there but price bounced at 1.5624 so I missed a possible entry.
Since then price has made it up to the 200 sma and the BEARS have entered the market.
Where we go from here will most likely depend on what happens at 13:30 when we get the critical Non-Farm Employment Change and Unemployment Rate.
GBP has now bounced no fewer that 9 times from the 1.5589 - 1.5623 area so support here looks formidable.
A break could see GBP accelerating south but a break of 1.5756 (Weekly R1) could see GBP go much higher as it would have broken trendline resistance, yesterdays high, the Daily 61.8 Fibonacci and the Weekly Pivot.
The Non-Farm Employment Change numbers came in much better than anticipated - 321K actual 231k anticipated.
This has sent GBP (and most USD crosses) into a nose dive and GBP is now approaching critical support at 1.5590.
If we get there and price looks like its bouncing then LONGS may come into play.
We are 14 pips away from this line and its high odds the BEARS will target it to try and break it.
The BULLS will be ready as many people will be looking at 1.5590 to get LONG.
We need to wait now and see what happens.
With so much support around 1.5590 as soon as the BEAR surge was halted and STOPS cleared, going LONG was an easy choice.
I got in at 1.5580 with a STOP at 1.5563 for a -17 pip risk.
Whether GBP can hold on to these gains and stay above 1.5590 remains to be seen but there’s a reasonable chance we’ll see some kind of pullback just to relieve the oversold conditions on the shorter time frames.
The break of 1.5589 was probably the sign that GBP is headed lower over the short and long term.
GBP made it back to 1.5604 but the subsequent retest of 1.5589 failed so I exited my LONG and went SHORT at 1.5563.
The price has currently found some minor trendline support but any bounces here should be seen as an opportunity to SHORT.
1.5589 will now prove formidable resistance to GBP BULLS and the picture looks bleak for GBP/USD.
Its a thin week as far as news is concerned with GBP Manufacturing Production out tomorrow the only GBP release of any significance. Its unlikely that this release will make any change to GBP’s overall direction.
I expect the BULLS to attempt a minor rally from these levels and test the strength of 1.5589 but any sign of rejection will be an opportunity to enter the market SHORT however a decisive break of 1.5589 and a return and hold will alter this analysis.
The support/resistance area finally broken by the BEARS on Friday presented no resistance by the impressive GBP rally on Monday triggered by a weakening of the dollar.
For some time I’ve been saying GBP was in a medium term BULL rally but the breaking of long standing 1.5584 did not discourage GBP BULLS in fact it was the trigger for an all out assault north.
The 2 heavy green lines on the chart are a loose channel that GBP is currently in. I say loose because it can be very difficult to set channels as prices seldom keep to them and will frequently break and return to them.
That said its clear that price has bounced from the lower reaches of the channel and we now sit at the upper level.
Where to from here?
The overall picture remains BEARISH but the USD has come off the boil recently and GBP may turn increasingly BULLISH.
A definitive break of the upper channel would confirm this so as long as GBP remains above 1.5700 I shall be looking for LONGS.
If GBP declines from here and the key Weekly R1 Resistance is not taken out then I shall look at the 15m chart and wait for a break below the 200 sma to go SHORT.
The pair has been trading strongly and till now there is no any major resistance which suggest that the pair price sight go up.
GBP starts the weak on the back foot having been rejected at Monthly Pivot at 1.5741 which coincides with the upper edge of the flag we’ve been trading in for the last 2 weeks or so.
The rejection has been quite dramatic and the BEARS have broken through the lower edge of the flag and has tested the very strong support (now turned resistance) of the Weekly Pivot and the 200 sma.
The picture looks very BEARISH from here and with the absence of news I’m expecting GBP to head down to Weekly S1 support at 1.5590 70 pips down from here.
I’ve gone SHORT at 1.5659 with a STOP above the resistance at 1.5679 for a -20 pip risk.
There’s no significant news today so we may see price drift but down looks favourite.
I’ve moved the SHORT from 1.5669 to 1.5656 - just a bit better than break even.
This is now a free trade with an initial target of 1.5590.
My GBP SHORT never made it to my target at WS1 (1.5590) and reversed sharply from 1.5600 big number.
The 200 sma again halted the BULL push but since then GBP has recovered from a disappointing CPI print and has surged north.
1.5741/44 is now the key area for BULLS. A break of the Monthly Pivot here and yesterday’s high could see GBP advance to 1.5805 WR1.
However. As we are still in a downtrend I’ll be looking for signs of weakness at 1.5744 and look for SHORTS.
GBP is 30 pips away from this level currently so in the absence of market moving news I expect to get there and I shall review the situation when/if it does.
Harmonics play a great part in trading. Its because of harmonics that prices move away from certain levels and are drawn to others. This is a complicated subject but a good example of it occurred yesterday on GBP/USD.
I was SHORT hoping for the price to reach WS1 where I would have exited and gone long. Price never got to WS1 and I was eventually STOPPED out for a small gain. Having missed the entry at WR1 I decided to wait until price hit WR1 to go SHORT.
It never got there.
Remarkably though WS1 missed by 20 pips. WR1 also missed by 20 pips. This is an example of harmonics but in this case it was near impossible to take advantage of this phenomenon.
Where does this leave GBP/USD?
The Claimant Count bettered expectation and there were no surprises from the MPC.
As long as price stays above the 200 sma on the 1H chart and above Weekly Pivot price should advance north but finding an entry from here is difficult.
My advice would be to wait to see what happens if price makes it to WR1 at 1.5804 or yesterdays high at 1.5784 and see what happens.
If the BEARS step in then I’ll look to SHORT with a STOP above 1.5804.
We are still in a downtrend overall so SHORTS can he held to see if support is broken but the Daily time frame and Weekly time frame are moving out of oversold and are looking increasingly BULLISH.
On the W.T.F. 1.6023 looks a likely target so we could be heading up there but we need more confirmation.
This would come with a break and hold of WR1.
What’s in a word?
Well - if the word is “considerable” and its missing from the FOMC statement then its…well…considerable.
The FED’s pledge to keep the financial stimulus going for “considerable time” has gone.
This means the prospect of a US increase in interest rates is just round the corner.
This news had an immediate strengthening effect on the USD across the board and GBP/USD lost 160 pips in no time.
However that was yesterday and the markets have had time to think and digest.
Everyone knew that this move was coming and the knee jerk reaction to the news is now moderating.
I expect GBP to recover much of this lost ground but at 09:30 we have Retail Sales.
If Retail Sales exceeds expectation then this recovery could be rapid.
If however Retail Sales disappoint then the BULLS could be held back.
I think from here the numbers will have to miss spectacularly to hold back the BULLS.
I shall wait to see the numbers and plan my trade accordingly.
The Retail Sales numbers exceeded expectation (0.3% exp. 1.6% actual).
This should have encouraged GBP BULLS but as yet we have had no follow through.
Overbought conditions on the 5m RSI will have to be relieved before we can go LONG on this pair.
If we pull back to the 200 sma or WS1 at 1.5590 we can go LONG with a STOP under todays open.
Yesterday we were looking for an entry to go LONG off the 5m chart. The initial push to just short of the weekly pivot retraced but never made it to our ideal entry at the 200 sma or the Weekly S1 pivot at 1.5590.
All charts are clear in hindsight and going LONG at 1.5603 would have worked but there was no confirmation that the price would head north like it did and it could have easily turned south again and targeted WS1.
This would have left you holding a LONG position and on a break of 1.5590 and you’d be many pips down not knowing whether to hold or exit so it wasn’t worth the risk.
Currently its clear the BULLS can’t take out the Weekly Pivot at 1.5673 so we’re stuck in no mans land waiting to see where GBP is headed.
On the 1H chart price has hit the 200sma which sits just above the weekly Pivot and with yesterdays high and todays open both above the current price this looks hard work for and LONG trades.
The path of least resistance is down so in the absence of news I expect GBP to head back south over the next few hours until 1.5623 area where there may be some support.
LONG from 1.5590 will come in to play if we get there or from 1.5681 with a confirmed break of all the resistance.
A SHORT from here (1.5653) is possible with a tight STOP at 1.5680 but its a bit risky.
Not much to say about GBP/USD today. Price is equidistant between WS1 and WR1 and could move in either direction.
RSI is also stuck in the middle on most time frames.
1.5617 offers support but its weak.
A break of 1.5600 may target WS1 at 1.5519 but this is a meandering market and best left alone.
Its looks possible that GBP/USD long term target is the lower trendline marked on the chart. This comes in approximately at 1.5286.
The simple moving averages would strengthen this suggestion. The 25 day sma in orange looks like it will slide lower before either continuing even lower or heading back north if the trendline holds.
Currently price is 1.5549 having dropped all this week on the back of the revised growth numbers at the weekend.
So although we could see pullbacks the trend remains down until we see what happens when we hit support lower down whenever that is.
Over the short term the price currently is holding just above the 200 sma on the 5m chart.
I may look to SHORT if we drop below this line and prices tests and remains below it over the next hour.
Not much to say for the next few days.
Most likely GBP will head north before resuming its journey south but how far and over what time scale is impossible in the absence of news and normal trading conditions.
Should G/U make it to the 200 sma (1.5614 area) or WR1 at 1.5649 there may be shorting opportunities but staying on the side lines for now is the best advice.
