Where is the Pound going?
David Song thinks it is due to
bounce higher:
[B]Hello traders!
I have been looking at the Cable to see the position that we are in with this pair within the last year;
please take a look at this chart first:
[/B]
[B]
These facts stand out right away:
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there is a rising channel, marked here among equidistant green lines;
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the low/root of the channel is at the 1.48 level;
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the high/peak of the channel is at the 1.72 level;
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the half-way point level between 2) and 3) is at the 1.60 level.
So, how is this going to help us in our outlook?
As you can see on the chart, the low/root of the channel occurred in July 2013,
and the high/peak occurred almost exactly a year later, in July 2014;
the symmetry does not not stop here, however: the half-way level (1.60) was
at the heart of price movements in September 2013 and… it is yet again where
price is gravitating now, a year later, in September 2014.
How can we use us for trading?
In this thread, at this page http://forums.babypips.com/forextown/67973-whats-happening-gbp-usd-10.html,
I stated that a larger head-and-shoulders pattern is taking shape, with the right shoulder being at the historic 1.69-1.70 level;
we are therefore faced with three possibilities:
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a continuation of the bear trend from August to complete said “h & s” pattern all the way to the historic 1.39-1.40 level;
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a repeat of the upward move of September 2013, from the 1.60 level, within the highlighted channel;
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a combination of 1) and 2), namely a last charge up, leading to the BoE rate hike of Spring 2015 before the move lower.
Over to you traders: vote with your money!
Happy trading.
[/B]
With no break of any new 3-day low I am still on the sidelines. The current price is just over 300 pips below the 200-day sma and 332 pips above the 9/10 low. With the election announcement giving no further upward movement, it would seem that the market is downward biased for this pair. Waiting to go short…
Looks like US dollar strength is a much stronger theme compared to the Scottish referendum results…
In drawing a trendline, there is a technique described by Victor Sperandeo in his books. He draws an upward trending trendline from the lowest low to the highest low after which a new high was made. The 7/15 high of 1.7191 was preceded by the 6/11 low of 1.6737. After that 7/15 high we have seen lower highs.
With a closer look, you will notice that on 8/13 we see a long red candle which broke the 6/11 low into lower territory, confirming the end of the uptrend. On 8/18 and 8/19 the price went up to test that level again only to bounce lower not to return since. If the upward trend is to be considered as having resumed since, the confirmation will not come until we see a break above the 7/15 high of 1.7191. If we see a new low below the 9/10 low of 1.6050, we will have confirmation that a downward trend is still in play. Because we have broken that upward trend and are trading below the 200-day sma, short plays have the edge for now. In fact, we could easily bounce off of this new trendline to go south from here as we are just touching it. Look to go short.
Excellent and very clear analysis, Arbitrager…
I concur. Sterling has the potential to retrace but I still believe the USD will continue higher after minor cycle corrections from the European currencies.
+1 I agree. Thank you
Gp
It obvious that the US dollar is strengthen day after day against the major currencies.
The trading is week is about to start… less than two hours to go!
[B]
WHAT WILL THE STERLING DO?[/B]
The trouble with the USD strength is that if the Fed should get its rate hike bet speculation timed wrong,
it will cause a burn-out in the same way, or in a similar way, as has been seen this year with both the Bank of England and the Royal Bank of New Zealand…
If the composite-dollar index (Dow-Jones Index; ticker: US Dollar) should continue charging higher, it may well be overdone by the time the rate hike came… When are the Fed going to charge in and bring down the over-leveraged investors and prevent a bubble burst? In fact, bubbles rarely gently deflate, so a burst may well be the inevitable (and, for ‘chart-ists’, the natural technical) consequence of an over-stretched market that has generated an equities bubble on the back of ‘cheap’ Fed money that should have actually fed the recovery of small and medium-sized business and private consumption - something that it has failed to do,
with inflation-adjusted banking products showing negative rates of return for the working classes…
So: is the Fed really in control of interest rate? If, say, home and foreign holders of US bonds cut their bids or pulled out altogether tomorrow, or sooner than imaginable (in this ‘bull’ market), would the Fed really be in control of rate movement? Would they not be bent over the barrel and pushed, almost against their will, to obey the market makers? The Fed, like any other large bank, may have QE as a great tool with which to control price through supply levels, but, in the end, the debate over rate hikes is indeed over-done: and the threat of risk-aversion scares many investors from truly pushing something like the S&P500 higher.
From what I understand, [B]this bubble is going to burst: it is only a question of WHEN, not IF[/B]…
Will the Fed’s interest rate hike be strong enough to counteract a crashing stock market to save the financial system?
We shall wait and see… In the meantime, the markets are already ‘buying the rumour’, so if more future-voting Fed board members should speak out as rate-hike hawks, there will be no stopping the current USD rise…
Sellers beware…
Cheers
A big decline in stocks, or better, a crash would likely give us a major positive move in the dollar with the flight to safety. But that could come years from now. We could see new highs in stocks for many months to come, perhaps years, with or without rate hikes from the fed. In fact, investors may mark those hikes as positive reasons to appreciate more value in stocks. Bonds are going to have trouble with higher rates, but even those could be surprisingly resilient. A panic will come some day and a good trading system will benefit from the next black swan. But trying to predict her landing will move your nav toward a goose egg.
A guy who speaks my language. Well said… I totally agree.
I love this post although I know nothing about fundamental. It is not about predicting the market in trading, it is all about high probability from analysis or system. Predicting the future leads to failure, to me at least.
The GBPUSD is getting hurt by strength in the Dollar and weak UK fundamentals.
How do you know it is not just traders nerding out on formulas, trendlines, fancy flashing lights, and artsy looking drawings with Japanese names?
But it is true that it is the dollar that has pushed GBP/USD down at present…GBP/CHF, for example, and GBP/NZD have been on the up, and not due to Pound strength… 
So…
Inflation is downgraded by the BoE governor and
yet the Pound rallied up more than 150pips…
Some mention of a ‘future rate hike’ being the next
move was enough…
Ridiculous!!
The BoE hinted rate rises. Flash back from the 1.7000 days. If I remember everyone going long above 1.7000
Hopefully Cable doesn’t love and leave us.
On the topic of Volume at 15:00 10/2/15 the big money came in, still above the 200EMA. I knew something was up. Checkout Pipme. I’ll post later.