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MadMarketScientist

GBPUSD Trading

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When a market gets too crowded on one side, the risk of a reversal increases. The bull story has been touted to the world. Where do the new buyers come from? What happens if the pair just meanders side ways. Some longs may get tired of the position and want out. Or what if the fundamental numbers released in Britain fall short of expectations?

 

In the long run there seems a possibility of much higher sterling, but first, we need some long liquidation, a cleansing of the market in my opinion. Selling close to the 1.70 handle with an appropriate money management stop looks interesting. The target is the 1.67/1.6750 area.

gbpusd-d1-excel-markets.png.4fe0b05615d2b4870710b99973972681.png

gbpusd-w1-excel-markets.png.2f4bf8f474189f7f62ad4e0f17c086a3.png

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Having broken above 1.70, the next major resistance level for GBP/USD is 1.7335, the 50% Fibonacci retracement of 2007 to 2009 decline. If the currency pair takes out its current 5 year high of 1.7180, the next stop should be this key level. However if sterling drops below 1.7085, there is no major support until 1.70.

gbpusdd.thumb.png.cbe0aa17769d54056c6354325a38765e.png

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Taking a look at the technicals, cable is now retesting the yearly highs near the 1.7200 level. A failure here would create a double top, but a break above opens up a run all the way towards the 1.7500 figure - a level not seen since 2008.

GBPUSD_07_15.14-405x249.jpg.7fcba298860eaed73f59d9aaf47428c7.jpg

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I think it is on the verge of breakdown. might take some time since cad behaves a bit differently but it will break 1.82 eventually and move towards 1.80 or 1.78

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Resistance at 1.70550 if we break that most likely I exited my long for now going to re enter if we break above this point. and there we go lol... Targeting 1.70675

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In UK the MPC minutes revealed that UK policy makers remain decidedly nuetrat with respect to monetary policy offering no clues as to when they may hike rates. The minutes showed a 9-0 vote to keep rates unchanged in the July meeting although some members did feel that conditions have become more balanced over the past few months than earlier in the year.

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There is no important GBP news until friday, so I wouldn't mind if this was ranging between 6950-7050 until then and on friday, which is also the first day of new month, it can break to the upside/downside. Keeping my long open until a 1.7 re-test, at least, if it breaks, I will close it at 7040 and try a short there. If we break 6960, I will close it on a pullback.

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Looks like I exited at the best time, price close back at 6821. I want to buy early asian session next week, for some easy 20-30 pips, there won't be no breaking of lows during the first few hours of next week, probably not through the whole asian session.

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Thirteen trading days have now past without a meaning rally in the GBP/USD. This is the longest stretch of weakness that we have seen in sterling since August 2008. The currency pair has obviously become deeply oversold and now everyone is wondering if GBP/USD is due for a recovery. From a fundamental perspective, further losses are likely because next week’s U.K. economic reports should reinforce the weakness that kicked off the decline in the currency. U.K. data took a turn for the worse in mid July prompting the Bank of England to tone down their hawkishness and speculators to abandon their long positions, which hit 7-year highs on July 1st. According to the latest CFTC data, long sterling positions have been cut by 55% so with how deeply oversold the currency pair has become we would be surprised if there were no recovery. However the magnitude may be small given the shift in monetary policy expectations and economic backdrop of the currency.

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Specs have been long the pound for months, but they have been gradually selling out their longs. The total long position remains, but it is down to 44.9K from 48.2 last week. This market is no longer an out of balance long, and might, perhaps, be due for a bounce.

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As it is UK bank holiday it is most likely that pound will travel small pips into one direction. Gap on opening very possible, where - no one knows. On Sunday there was a summit of some sort, so it most likely echo on possible price opening!

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Amidst all the hoopla surrounding the euro, few market analysts have notices that cable's decline has been even more dramatic. The pair is off more than 800 points from its 2014 highs and shows dew signs of stabilizing. Ironically the latest economic data from UK suggests that activity remains strong and that all things being equal the BoE may be the first G-7 central bank to move on rates. However, the trade in sterling is no being driven by politics rather than economics. The surprising gains of the Scottish independence vote - which analysts describe as a movement not a campaign - has made the outcome highly uncertain. If Scotland does spin out from UK, the ramifications are unknown and cable could drop further. The vote is not until September 18th so in the meantime traders will be watching the polls and this Tuesday's commentary from BoE Governor Mark Carney. Any pick up in the NO vote could provide a relief rally in cable, but if Yes continues to gain momentum the pair could drift towards 1.6000

GBPUSD_09_06_14.jpg.573c1a99f14d90df4a5c1670a0caa1d9.jpg

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