Cable conundrum

[Mercury]

Well it is tax year end so maybe a lot of people are selling shared to crystallise losses or utilise capital gains and repatriating into GBP.  Still you know the old saying - "lies, **** lines and statistics"...

[Mercury]

Market is at my 62% Fib and congestion zone showing an A-B-C formation and good indicator support for a Short.  Have taken Short at the Fib 62.

 

PS: also too a short on EURUSD at top of Triangle and EURGBP is motoring down now, all good.

 

Just need indices and Oil to join the party...

[Mercury]

just hit 76% Fib off the 30 March top and bounced back off...

[Mercury]

USD up across the board, flight to safety or expectation of rate rise or something else?

[Mercury]

Like I said previously, these policy decisions usually get leaked to soften the ground.  "BoE MPC does nothing shocker!"  Can't see that as a headline can you?  Votes for cut isn't much either, more interesting would be whether anyone separates from the pack to call for a hike, now that might set the hares running.  1 woundn't but 2 or 3...?

[Mercury]

So BoE MPC does nothing.  Shocker!  Not!  And market reaction?  Baa humbug!  So far at least.  If it drops from here it is another example of what is wrong with the market right now.  It needs constant central bank stim to keep going and so far they have been obliging but how long can this travesty go on?  Free markets?  Yer avin a laugh!

[Mercury]

LOL!

 

Please no!  I can't bear it that my taxes are being used to prop up the FS spivs...

 

I smell an insurrection coming

[Mercury]

Seriously though, with a presidential election in the US and Brexit here in the UK I can't see any political air cover for helicopter money, I mean can you imagine what Donald and Bernie would do with that?  Talk about a vote winner!  Here it put into question the whole Brexit argument, isn't this the kind of thing the Brits want to avoid with the ECB?  And in Europe the Germans are already rattling Draghi's cage on what is is already doing and saying, no way they support Helicopter money!  Japan might but so what?

 

No I think we have come to the end of the central banker road, even QE 4 in the US would cause a problem and no way we can consider NIRP in the UK or US, it would be the end of the World as we know it.

[Mercury]

I guess the powers that be haven't studied Einstein!

 

In particular his definition of insanity, surely he is once again being proven right!

[Mercury]

PS: I totally agree with quotas for immigration in Europe, this is not a refuge thing but an invasion and if the EU do not manage it and give in to liberal hand wringing our children will reap the whirlwind...  Nothing to do with trading but hey, it's nearly Friday... 

[Mercury]

Cable is, hopefully, no longer a conundrum for me, it is going the same way as EURUSD only different.  I don't see GBP as being as weak as EUR, despite all the Brexit stuff.  For sure it will go down but for now at least the support line at about 13450 looks favourite.  Having said that there is a possible set up for a crushing Bear if my weekly labeling of the recent purple 1-2 turns out to be right.  This would indicate a strong downward move in 1-5 form that would crash through 13450 and head towards parity, we have not seen that since 1984.  If that happens we could be in for some Orwellian behavior too...

 

Either way it seems to be going down for now but not a fast or as strongly as EUR (good news for my EURGBP trades...) but I expect GBP will come more strongly soon.  On my hourly chart we have only just begun what I hope will be the big wave 3 but so far there has been a lot of chop holding this cross up from a bigger drop.  If we get a catalyst against GBP this could change soon.

 

I have a few good trades at the recent tops so, as with the EURUSD my strategy is hold them for the long term and sell into the relief rallies.

 

 

[Guest Rich88]

even though Aprils bullish for the gbp/usd, still looking to short 14300



 

[Mercury]

Well that was fun (!) now back to the analysis to see what we can make of it all.  I still see GBPUSD in a Bearish scenario and today's wild spike actually gives me confidence in this assessment (similar on EURUSD).  I see this market in a complex wave 4 but we could be coming out of it to the downside.

 

On the Daily chart I have a Triangle formation containing the whole move since 3 Feb 2016.  There is a classic A-B-C retrace of the Bear move back up to Blue 4 and after this the complex pattern kicks in culminating in today's bounce off the Triangle [i won't try to explain how a complex retrace is labeled but if you are interested look it up on elliotwave international online].  In addition the whole Triangle has a sequence of 1-5 touches/waves (very often the 5th is the last and the bounce back off resistance at this point shows the direction of the long term trend.  Add to that neg Mom div at the Blue 4 point and other indicators turning down and we have a proposition at least.  There is a chance of a rebound off the lower Triangle line still but a stoop protected Short at the top is a decent bet.

 

On the Hourly then, I see a Wave 1-2 retrace (brown labels) off the Green 2.  It is almost a double top but you get that in complex Triangle formations all the time so the Fibonacci relationship doesn't work in these moves.  Neg Mom Div between Brown wave 3 & 5 turning points (the latter also at the complex C/y & Triangle 5).  Solid A-B-C EW count up to today's high and a strong rebound off the Triangle resistance all points to a strong Wave 3 down now.

 

If you look at EURGBP you may see a likelihood of a relief rally, which suggest either than EUR will retrace back up further and faster than GBP vs USD now OR that GBP will cane it down...  Int he former scenario DX wont help much with GBP as the EUR is the biggest part of that basket.

 

Look forward to comments and alternative views as always!

 

Here are the charts:



[Guest Rich88]

We seen a relief rally go to 14470 from the polls (70% in) but back to 14420 now. I'd like to see a retrace back to 14370 to know if this rallys over

[Mercury]

These little price gaps usually do close and when they don't it almost always signifies a major event, like a major market turn or a halfway point in a major rally (continuation gap).  My assessment is that neither of these events is on the cards at present.

 

I am still of the opinion that GBPUSD is in a complex wave 4 retrace (very hard to trade with a lot of whipsaw action and no clear direction).  However I believe we may be coming to the end stage of this.  Looking at the 4 hours chart (to compress the hourly and fit onto one page), you can see my labeling of the complex wave.  C/y is the end point but there may be one more leg up yet, hard to tell.  If you look at the Daily chart there is a strong down-sloping tramline (red) that may provide us with the turning point and a fresh high in this complex wave to complete the Wave 4.

 

There is strong Neg Mom Div on Daily, 4hour and hourly charts.  A sustained break below 14365 suggest wave 4 complete and we are in a drop move Wave 5.  A break above recent highs suggest another leg up to the Tram line before the wave 5 commences.  One to watch.

 



[donaldprice]

Hy Mercury, always interesting to see your analysis, i believe GBP USD has now reached a major peak of which is formed a double top formation, momentum does seem to be diverging, despite the rocket momentum caused by the poor data from the US this afternoon. If we break this strong trend line then we could without doubt look at the next fibonacci levels for guided future support. 



[Mercury]

Thanks , I just wish I were right more often, at least in terms of timing and that said I think this is another one where I have suffered from prematurity.  Initially I was targeting the junction of the up and down sloping trams on my Daily chart, which also tied to an area of lateral resistance and then I started seeing earlier turns and was afraid of missing it.  This is classic bad psychology in my experience and just shows that knowing about that doesn't stop us falling for it...  That's where we need others to provide contrary views to give us pause for thought!

 

Anyway back to GBPUSD, I am now firmly back to my original assessment, which is for a second kiss on the up-sloping (green) tram near the junction of the down-sloping tram and that resistance line.  This comes with good neg mom div and a solid complex wave count to C/y (the final turning point).  I see where you are coming from with the double top but the I actually think that is a coincidence (or at least what the previous top provides is more weight to the resistance line).  The issue with the double top idea for me is the existence of a top in between with a higher momentum peak, you really want nothing in between or a much smaller peak with smaller momentum for a true double top in my view.

 

I don't expect an exact hit in the junction, it provides a triangle of resistance and the market can turn inside this but I do think one final leg up is likely to complete a 1-5 of a final wave up.  Having said that markets often falter before giving this so I have a dual strategy here with a stop in near the resistance line and another below the previous low on the hourly chart.  Both for Shorts as the set up I have just described on the Daily has a very strong likelihood of a trend reversal.

 

Charts:

 



[Mercury]

Leaks happen of course but if there was a market wide one we would know about it through the press and that usually signifies an intentional "softening of the ground" leak on policy rather than a data leak.  I suspect this is just normal market speculation.

 

BTW, for the avoidance of doubt, when I mentioned the previous low for my stop in order I meant around 14500 (perhaps previous congestion zone would have been a better phrase).

[Mercury]

Can be, since there has been a market there has been attempts to illegally get an edge but can that move the market on its own?  Not sure and anyway what can we do about it?  Once the dust settles it's time to get back to the charts and figure out where we might be and what it all might mean, can we spot a trade?

 

On GBPUSD I see no change to my overall position.  I am still seeking the top of this move as a completion of that complex retrace wave.  This is in an A-B-C form and we are in the final Wave C (if I am right!).  In fact I think we are in the final 5 up to the resistance area around the 14650 area.  A turn here is likely in my view and then we will see.  A strong push through this level may throw us into seeking another scenario.

 

There is strong Neg Mom Div on the Hourly chart and a strong area of resistance on the Daily (see previous post on junction of several resistance aspects).  On the 15min the small w3 is in and now a final push up to or near the resistance level (it could fall short) is indicated and then we will see if it turns or not.  I think a Short in this area is a high likelihood trade.

 

Anyone got an alternative scenario?

 

  

 

 

[Mercury]

BTW, I should have mentioned int the original post that the alternative scenario is that the top was on 26 Apr and we are in a 1-2 retrace.  Such a scenario would come into play with a break of the lower tramline.  A sustained break (candle close) below the tram would be a decent Shot opportunity with stops to allow for a possible kiss back.

[Mercury]

We are arriving at the moment of truth for this market as it approached another kiss back on the up-sloping tramline (green) on the daily chart, a point with multiple resistance.  The actual tramline is at about 14680 but Cable is spiky and could turn plus or minus 20/30 points.  One to watch closely for a twitch today.  I have a solid EW count up and am expecting 1 more small leg up to the resistance level, which could be just a spike up or could be stronger.  A solid move down past recent lows would be a turn indicator for me.  A break of the hourly tramline strong indicator of same.

 



[Mercury]

Close below yesterdays highs is a supportive indicator that the turn has indeed happened.  Now all we need is a break of the lower tramline to confirm the move.

[Guest Rich88]

So far were staying in channel, but with this monster of a rally showing signs of fatigue and UK manufacturing pmi coming out tomorrow we could see a pullback

[Mercury]

Cable certainly went a little longer than I had hoped but then again it is a spiky market and often spikes through a resistance area before returning within it and that is exactly what we have here.  Just look at that spike and return on the Daily chart!  Is it a complex wave (green labels) or a simple A-B-C (red labels)?  Who cares?  That is all academic now and if price closes down today then we have a high likelihood that W4 is done and W5 down is on.  Looking at the hourly my lower tramline had been breached and now the question is whether we will get a kiss back of a sharp fall away.  A EW 1-2 retrace is normal near the beginning of a motive wave (in this case final wave 5 in all likelihood) so if you are not short already look out for that.  You need decent stop distance to allow for the spiky nature of this market though. 

 



[donaldprice]

Been planning this trade for a while and finally this morning after the poor manufacturing data took the plunge. I was questioning how valid the divergence of RSI and MACD was, also was slightly skeptical when IG live this morning was stating this could reach 15000, but everyones opinion is different i guess. What also allerted me was how it was hugging to its life on the tramline, almost comical how the bulls where holding on  to it, lol. Currently 38% fib level approaching if we break and head towards 50% no doubt exercise some caution, as you say very volatile currency pair.

[Mercury]

Spiky rather than volatile , which just means it has a habit of overshooting support/resistance levels and then coming back into line.  Results in needing wider stop levels than, say EURUSD, which is a bigger market place.  I think the turn is confirmed for me by the breaks of the 26 Apr high.  It could, I suppose, be a retrace before another push up if this is a motive and the market bottomed at 29 Feb BUT there is Neg Mom Div and over bought indicators on the Daily and hourly and A-B-C (Daily) seems like a better fit.  There is a lot of resistance to get through to make higher highs now and we had a very strong rebound away from the daily tram and associated resistance in that area earlier this morning.  However watch out for a sharp retrace in EW1-2 off resistance between 14480-500.  If in an A-B-C this will offer another good short opportunity when completed.

[donaldprice]

Quite right Mercury, Spiky not volatile lol, hear the word so much these days got slightly confused. Its always difficult i find to forecast present trends beyond daily time frames, possibly experience but as you pointed out when looking at divergence on those longer time frames, you can judge key areas of support and resistance to watch for and no doubt this is why always best to have those alarms on the edges of those tramlines, but for now watcing that 50% fib level/ 14480-500 level is key and as long as overall mometum does not change, looking to short would be the idea and therefore join the W3 trainride for a while.

[Guest Rich88]

Futher declines today if we see disappointed pmi

[Mercury]

Similar to your FTSE chart  no?  Here I think this is also in a natural EW1-2 retrace, also currently price is huging my lower tramline but I'd expect a pop further up before a resumption of the downward move.

[Mercury]

Cable looks to have entered that natural retrace I was flagging.  Nice potential for another kiss back on the tramline?  This coincides with the Fib 38% and timing is currently tracking to roughly around NFP time.  I'd prefer if it were coinciding with the 50% Fib and there is congestion around the 50/62% Fibs so that is a good bet if price punches through the tram on NFP.  Naturally a turn back down below yesterdays lows is a bearish signal.

 

[PS: Similar picture on EURUSD but this cross seems weaker than GBP right now and the EURGBP chart suggest ongoing EUR weakness vs GBP once this retrace is over].

 

[PPS: GBP has been tracking FTSE of late, really I think it is about USD strength on Stock market weakness, could a resumption in USD strength after NFP equate to another strong drop in stocks?]