A current example of intermarket relationships at work - there was a good chance of a price bounce on the 10yr when I posted yesterday evening, the slight bounce during Asia caused a similar reaction to USD/JPY (inverted to bond price).
If the 10yr were to continue to rise today then a paring of longs on the currency?
Yeah there is a big possibility…
GBP/USD has now broken through 1.6850, gradually moving past 1.6840 after some indecision; too early to say, but my short is looking good.
Yep, classic finish, Asian session down on Thur, momentum down, where not to trade through … weekly PP 6817 seems like a reasonable exit at the end of the week.
Momentum for the week -
Tue, down, loser, finished the day at +28pips, loss of 28
Wed, up, winner, exit at weekly r1, + 57 (never trade thru a weekly pp)
Thur, up, loser, finished lower 35, loss 35
Fri, down, winner, exit at weekly pp (never trade thru a weekly pp) + 35
Hmm, maths, ok net result…
Momentum in the market is something that even the most fundamental of traders recognize, momentum is the result of our human characteristic, our natural tendency to seize the moment, buy because price is rising, it rose yesterday, today I am looking at how to buy, I am bullish.
It was a phenomenon recognized and used by Wyckoff, it is often times referred to as being the catalyst for the notion of ‘overbought’ or ‘oversold’. There are many ways to measure it, the open (fx Asian) is just one, others use the close, yet others use the weekly PP etc etc.
Momentum can change perspectives, on cable this week we have a lower weekly pp, the preceding 7 weeks being higher. It would be normal now for a 3 week lower PP, then news may haul price back up and so continues the cycle.
I often think this is where TA and FA meet - in the momentum zone 
Btw TA learners, on cable, the yellow lines are the weekly pp’s, see the pattern over the past 3 weeks - clue: hair shampoo
Yo peterma- I’ve never really traded with PPs before…
So- the pivot is a representation of averaged cumulative extreme swings in price?
Seems very similar to my go-to indy- STOCH 14, 3, 3 (calculated similarly).
Trying to pick up what you’re putting down here…
I laid out the weekly pivots on an M5 chart and can see what you’re talking about.
When you say “it would be normal now for a 3 week lower PP”… are you saying that price can maintain downward pressure to the extent that it creates 3 additional lower weekly pivots?
Sorry, just a bit confused by your wording- maybe I’m missing something?
Hi Jake, just pointing out how, when in a ‘pullback’ on an upward trend it’s possible to use momentum as a guide.
Momentum by nature is focussed on the recent, bit like the notion of ema vs sma, so if you are of the opinion that GBP is on an upward trend, but like this week has seen a ‘pullback’, and if you are of the opinion that maybe now momentum will carry on this ‘pullback’, since it is momentum based it is reasonable to look at the most recent ‘pullback’ and to see how long this momentum may last for.
This piece not for you Jake, but maybe for someone trying to understand, it is a good idea to learn the concept of pivot points and how they came into being. Old ideas in the market still have much influence, tell some young dude that the old masters didn’t know what they were doing when folding over little pieces of card.
I’m telling this terribly, maybe look at the most recent ‘pullback’ before that last 8 weeks or so - see the 3 weeks, or click back a little and see the same, it’s reflective of the daily upward trend.
Interesting price behaviour on cable, the third pull back week has completed on Friday since the weekly PP’s turned down on Mon May19.
So, this week will be all the more interesting, if there is good news this week then how price reacts will indicate whether there are real buyers for GBP or not.
Equally, any bad news tomorrow on mfctr will indicate the sellers’ strength.
Key level is 6780, key also is the employment numbers Wed which may be strong.
6780 first acted as support, now turned to resistance in sympathy with EUR/USD.
Fibre is looking a little bearish, ECB move is maybe being digested, big week ahead.
Well, there you go, the third week pull back now history, it certainly has been “a big week” for GBP thus far.
See how 6780 remained key, as soon as we got the strong employment numbers it became solid support.
What now? - wonder will that word ‘momentum’ get mentioned?
I got in GBPJPY long right before the speech.
Thanks Marky Mark!
Appreciate the support.
I learned a valuable lesson as a new fx trader. Based on my newbie analysis of the GBP/USD I was leaning toward a upside breakout happening even if it took a few days or a week or two. …But I started reading everyone else’s negative opinions about the pair and I set my stop loss too close and got stopped out when the GBP/USD broke under recent support. I don’t even have a trade on and the GBP/USD breaks out today just like I thought it would. Dang, that sucks.
Nice work FU.
Some learner traders will be tempted to chase GBP now, sometimes that works ok, other times you will see your stop hit and then it’ll turn north without you.
One way to help is to consider who the UK’s largest trading partner is, then have a look at the cross in that currency and see what’s happening there.
Edit, Tophat, lots and lots of time ahead, this is only a hint, then there will the pull back, then the vote count etc etc
Thanks!
Purple is GBPUSD
Blue is GBPJPY
Orange is EURGBP
Green is GBPAUD
One thing I like to do when trading such large moves like this on a single currency pair (I’m long GBPJPY) is check the base currency against other majors to see if the move has breadth.
In other words, was the massive rally on the pair I’m trading more of a GBP strength move which the market agrees with across other currencies, or, a JPY weakness move isolated to this pair. The above image provides some insight into market participants’ expectations.
Clearly, the GBP rally has breadth, as we’re seeing similar price action vs. other majors (USD, EUR, & AUD).
Yes FU, I’ve seen that likened to overtaking on the motorway, before you change lanes you glance in the rear view mirror.
There were few surprises on GBP this past week, I was going to post that I bet the comms have increased their shorts on the latest COT but I chickened, lol none of us like being wrong.
The week ahead? - the title of this thread personifies how many of us retail like to trade, GBP has been rising so into our minds jumps the notion that it must fall.
I’ll not chicken now, I’ll bet that the majority of retail go short or are short GBP in the coming week
Hmm… let’s see me being proved wrong…
Might be of interest to FOMC watchers, figured I’d post it anyway.
IMF slashes US growth forecast | News | Money Marketing
Also UK Retail sales up on Thur, Market expecting contraction, see what the industry is saying:
Tomorrow is a biggie - UK morning we have the vote count. Cable reaction to any deviation from 009 will be interesting.
There are 2 MPC members speaking, all before FOMC.
I’m flat now, I’ll decide at London Opening what to do, the Asian session might help, the problem with trading pre fomc is the increased risk of spikes, a downward spike could go as far as 6850 - too far for a measured stop at present prices, having said that if there are buy orders sitting on the table, maybe 6880 is the place.
Just thinking out loud, there are a number of ways to play it, I’ll wait for the Asian high and low (probably will be little between those 2 numbers mind you :))
Well the Asian High and Low had only 10 pips between them, that told me that Asian traders were being cautious and that volume was probably very low, which meant that they knew as little as I did, so I followed their cue and stayed flat
Often a tight Asian is a warning of spikes ahead at LO.
Think I’ll take a little rest from the forum for a while, maybe see you all in the Autumn - bye.
Just came off my hols for a quick thought, the above IMF downgrade was posted 10 days ago.
Carney may re-emphasize the fact that wage increases in UK are subdued, that the economy outlook is positive and that there are risks associated with the housing market but that those risks are beginning to fall back somewhat and that the risk of deflation is minimal but needs watching.
One other thing, he may acknowledge that the numbers will dictate the future of interest rates, or in BOE speak, policy will be data driven.
If I am a trend follower then when I look at the daily is there a trend?.
Three questions I ask myself,
Is there current or likely imminent data that will change the USD element of the trend?
Is there current or likely imminent data that will change the GBP element of the trend?
On the daily - is there technical indications of an imminent change of trend?
I’m not proposing answers to these, merely allowing myself to learn.
BBC’s Peston’s thoughts:
BBC News - Can the Bank of England curb the housing bubble?
