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GBPUSD retrace trade

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Momentum definitely appeared to be slowing @cryptotrader but as is often the case it took a while to reach a tipping point.  On the Hourly chart there was a Neg Mom Div at the recent high.  I think the current bearishness is a retrace EWT 1-2 to set up a further rally.  I am looking for a further drop in A-B-C form before considering adding to my Longs.  Although as EURUSD hasn't yet broken out of its Triangle channel (and charting convention has it that you trade the breakout) we may yet see a breakdown.  For now though I am Long biased so will look to go Long off turns at key support levels.

  GBPUSD-Daily_010319.thumb.png.90aacdd3af9835d9c99521a9351b78c2.pngGBPUSD-4-hours_010319.thumb.png.6c9e88d8ccc5efc566a3781ed02d6db2.png

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FX is too tricky to trade just now for me, I am waiting for more clarity with some key breakouts or clear pattern retraces.  While USD (EURUSD) looks to have started to firm up on a direction I remain in doubt about this and wonder if we will see yet another twist in FX before the large scale retrace I have been patiently tracing for may months GBPUSD-Daily_160319.thumb.png.2227d178e81a30b185a7369b2d84914f.pngg.

Meanwhile there is a possible clearing of the mists on GBPUSD for me, still to be confirmed by price action, which is suggesting a Wave A-B is in play.  I do not know yet whether or not the wave Bearish move has started, we may yet see another leg up to the Fib 50% first.  In any case I am not seeking to trade this B but rather to spot the rally into the final wave C of the larger scale retrace.  I am liking another retest of the breakout zone for a wave B conclusion.

If this materialises it could herald a similar move on EURUSD and hence some short term strength in USD.  I am expecting GBP to go through a period of relative weakness vs EUR as well.

 

 

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So far GBPUSD is following my road map from mid March.  Looks like a Wave B (green) in the an A-B-C format.  If we get a lower low the breakout zone support level is a likely turning point.

Question though, can EURUSD rally while GBPUSD falls?  Well the reverse has happened so why not.  To check this I look at the final leg of the Triad (EURGBP), see separate post.

 

GBPUSD-Daily_300319.thumb.png.91082c51dc4f7630b0774b765af7cf34.png

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As is often the case, the markets are taking their sweet time to develop against my road maps.  There have been some swings up and down since my last post on GBP but overall it is still following the road map.  The previous Triangle breakout zone remains the favourite for a wave B turn into a rally to complete the A-B-C retrace.  Although with GBPUSD you can't rule out a spike low to the next level.  Could be a tricky one to trade.  That is why I prefer EURUSD but it is important that there is congruence between these 2 markets for me so I continue to track it and the related Triad cross (EURGBP).  The top shout for a rally end is still the 14,000 level for me.

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GBPUSD also still following my road map.  First chance for a rally for me is the Fib 62% zone where the previous channel breakout occurred and a previous retest failed.  Chance for a test of strong support at Fib 6/78% cannot be ruled out and this pair is spiky so could easily occur.  All aligned to directional price action on EUR and AUD as well.

GBPUSD-Daily_190419.thumb.png.ba0dc0cafb2e4bd86d2d81d8bfbbdb24.png

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Resistance at 12890, holding off for now to see if it falls below 🤣

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GBPUSD decline continues as EURUSD took a slightly more dramatic turn down yesterday.  As with EUR, signs are bearish but that is often the case right when a turn is imminent.  I still favour the 12,800 mark (Fib 62%) or possible even a bit lower for a storing turn to rally scenario but with price currently wavering at the Fib 50% and with EURUSD at an important point for a potential turn also I am interested to see if any rally price action will ensue off the current zone.

On the Daily chart you can see that price has spiked through the Fib 50% support zone and rallied back.  There is strong Pos Mom Div at this point and a credible A-B EWT set up in an overall, so-called, complex retrace.  On the 1 hour chart things are a bit more interesting.  As with EURUSD I have a strong lower channel line (3 clean touches) and a breakout of the upper channel line, that zone currently being retested and a minim ice line off a V pattern spike and rally.  A breakout of this Ice line is a good sign and low exposure point to trade Long, I went Long off the Channel breakout for a very low exposure initial trade.

GBPUSD-Daily_260419.thumb.png.e9b2f7ebd6a4f978e03332925fd26a5d.pngGBPUSD-1-hour_260419.thumb.png.068cee4294b812a1053067797ff7c4c1.png

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Textbook break and failed retest of the short term Triangle/ending diagonal/narrowing channel (take your pick).  Price is now breaking that short term ice-line, remains to be seen if this break is sustained but I am Long with close stops and low  exposure risk according to my trading model so in a good position either way.

GBPUSD-1-hour_260419A.thumb.png.41d87dc464f6cc97c80983a7cd2c38f8.png

 

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Time to look again at the bigger picture so as not to get sucked in by 1 hour chart snow blindness.

Looking at the Daily chart:

  • First off I do think that early Jan 2018 saw the wave 1 (blue) end and turn as the EWT count supports this structure (a 1-5 down), we had strong PMD at this point and the COT data was net negative (bearish) at the turn, a fairly common occurrence as the professional trend followers pile in ad a key indicator for contrarians.
  • What  am not sure about is whether the rally up to 13,400ish (which I have market Wave A - green) is in fact a wave A or a compete retrace (that would be a wave 2).  It does have an A-B-C form and NMD at the turn so that fits.

So what is holding me back from going with a retrace completion and on to a major Bearish move (which I think is the long term highest likelihood scenario)?:

  1. I think a retest of the previous breakout bearish move is a higher likelihood retrace conclusion
  2. This while move could be a complex retrace, which fits the A-B-C form of the Wave A
  3. The COT data has not got net positive at wave A and indeed is more positive now than then
  4. The move down from Wave A was not strong, which is what you would expect from a wave 3, but rather insipid and whiplashy, which is not synonymous with a Wave B

So my prognosis remains that we are only half way through a major counter trend retrace, which, when completed, will start a major Bearish phase for this pair (and other related pairs).  However I am not saying the Wave B has completed, I favour the retest of the rally breakout around about the Fib 62%.  Still looking at the 1 hour chart it could be showing us an early turn, Wave Bs are very hard to fathom.

I am Long with very tight stops to catch this if it jumps away next week,  If not then a small loss and wait for the next level.  

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After the original ending triangle (narrowing channel if you prefer) breakout, where I went Long, this pair rallied hard away in line with EURUSD.  Then retraced like EUR however unlike EUR it only went down as far as the Fib 50% zone before rallying hard away with PMD and a clear A-B-C in play.  This supports my assessment that this is a wave 3 of wave C relief rally as the wave 3 is typically the longest and strongest.  I managed to add to my positions at the Fib 50% turn.  This one should run and run (but watch out for the Flag consolidation, which should signal the half way point.  But the dips is the order of the day on this market for me. 

GBPUSD-1-hour_030519.thumb.png.2bca0780e8ac0fd647956b2528d88422.png

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After a sizable short term rally we have seen a strong retrace back to the Fib 62%, common before a major move.

Is GBP primed for a breakout?  Looking good for a sizable rally to me.

GBPUSD-1-hour_100519.thumb.png.43d9aac7e60bdbc94c523eca0e53819e.png

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GBPUSD has travelled down to the Fib76/78% zone and has bounced off that level.  This wont be confirmed until there is a higher high/higher low but this is a decent place to take a Long with close stops below the support zone for me, if you believe the medium term trend is up of course.

Having failed at the 11260 level yesterday EURUSD is now trading in a tight short term range between that important Resistance level and about 11210 so the rally is still in play, for now.

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First support has been broken and now we are at the previous Triangle breakout zone and Fib 88%.  This is the last chance saloon for this set up.  A break below the B (Green) previous low will bring up a new scenario.  Still the indicators still favour a rally but will it be one that carries through upper resistance or just a short term blip?

The EWT count is good for an A-B-C retrace plus we have PMD and strong support at the channel breakout zone, a common retest point in consolidation phases.  Shouldn't have to wait too long for resolution.

GBPUSD-1-hour_140519A.thumb.png.61c6850c3cf375f1881b632a8ea0ddfc.png

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Unconfirmed reports PM May will be resigning tonight.

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PM in a 9 am meeting and an announcement is expected immediately after.

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Theresa will be downstairs to make her statement in a few minutes

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GBPUSD at a pivotal point for me, knocking on the door of a 1 hour chart ending diagonal formation after a rally off the Fib 88%, last change for a wave B turn.  PMD on the wave B turning point and possible small EWT1-2 in, although a more defined 1-2 could still be on the cards.   Regardless a confirmed breakout of the triangle line will be indicative, any longs should have stops just below the wave B turn low.  This is aligned to EURUSD and DX at present (see other threads.

GBPUSD-1-hour_240519.thumb.png.dd32dc728b8917392dced39ea7deb53a.png

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Quick update.  Looks like a small 1-2 retrace is in, followed by a breakout through the channel.  Might get a quick retest next week before the rally takes off, assuming there isn't a push back down into the channel with a fakeout.

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Why should there be a 'rally' of the pound?  Boris Johnson is up next.  Do you think he will negotiate a nice orderly exit from the EU?  Trading on Friday was an absolute death trap.  It could just as easily drop back down like a stone.

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GBPUSD is at a pivotal point on the  hour chart for me, a retest of the channel line, previously broken.  Might get a small bounce and retest to mirror expected price action on the larger EURUSD.

@dmedin, as regards your question, or assertion really, I do not agree that GBP is chiefly moved by Brexit shenanigans in the bigger picture, which seems to be the premise underpinning your position on this.  I have 3 main reasons as follows:

  1. Currency pairs are driven chiefly, in Fundamentals terms, by the relative strengths of the economies in the cross within the wider geo-economic backdrop (i.e. recession tends to drive strength in certain currencies like the USD).  Not withstanding recession, this stength or weakness is most accurately reflected in balance of payments or trade deficit, which is bad for GBP right now and has been for a long time.  FWIW this is one of the main arguments the pro Brexit people field (and the most convincing one for me) couched in limitation to the UK's ability to forge independent trade relationships outwith the EU's undoubted bureaucracy and divergent self interest (of the Eurocrat elites that is, not the people).  The argument goes that free of this bureaucracy the UK can address it's balance of payments issues head on and more swiftly and that should trade with the EU come to a full stop the UK economy would technically be better off as we spend more with the EU than we get back, hence this would improve the UK's balance of payments.  There are plenty of counter arguments, some are even convincing, but there is a lot of hot air and emotion as well.  The point being no one really know what the long term impact of Brexit will be so why assume it will be bad?  That is just fear of the unknown talking.  If I can't figure out what the impact is actually going to be from a Fundamentals perspective I tend to ignore it and let the technicals, based on price action, tell the tale.  GBPUSD was going down before and after the Brexit referendum so no change there.
  2. That said I do believe, for more Fundamentals reasons that political claptrap, that GBPUSD is heading down.  EURUSD is too and more drastically than GBP, hence my view on EURGBP, see separate thread.  But markets do not move in straight lines and I am anticipating a significant retrace (AKA relief) rally to "prime the pump" on a long term bear market.  Naturally these markets could indeed drop off a cliff from here with a previous shallow retrace having been sufficient from a technical perspective.  If that happens then I would seek to swing my bias and go Short on key support breaks.  Until then I will follow my current strategy and seek a turn further up to get Short.
  3. Perhaps the most important factor in my assessment is that I am anticipating a USD weakness led retrace move across major USD pairs.  Note that means it has little to do with the other currencies.  The USD is the biggest influence on the GBPUSD cross so why look at GBP much at all?  Check out my "what is the USD doing?" post if you are interested in this aspect.

So to summarise, within my trading methodology:

  1. I do not bother much with short term media news headlines and political twists and turns - you can't predict what the market will choose to react to nor which way it will go as a result (how many times have you heard people say how the market moved in the opposite direction because the news was priced in?  Which of course they have no way of knowing either way...  This is classic Post Hoc Ergo Propter Hoc thinking, or as Daniel Kahneman has it, thinking fast rather than thinking slow - i.e. lazy analysis, received wisdom and confirmation bias.).
  2. I believe markets move in waves that are, to some extent, predictable (or at least may be anticipated and prepared for with key indicators and triggers upon which trading them as a swing trader can be lucrative
  3. I am a contrarian at key turning points, so when everyone is saying Brexit, or EU elections, or PM changes will hurt GBP AND it is at a key potential turning point AND my system indicators are showing me a turn is on, I will be at odds with the majority.

 

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GBPUSD also at a critical turn point, last chance really save for a double bottom.  PMD is good for a turn.

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EURUSD and DX seem to be well on the turn.  Is GBPUSD about to join with a channel breakout to the upside?  Good EWT count for an A-B-C to wave B turn.  Wave C has a nice clean 1-5.  PMD at the Wave B turn point near the Fib 88%.  Channel is parallel style with good touches and decent prior pivot points (before the last major turn).

GBPUSD-4-hours_310519.thumb.png.e6eacef95df5707e66fc325512ff6b95.pngGBPUSD-1-hour_310519.thumb.png.367ceef7f62d98cc27eb94dc53ee5a24.png

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Posted (edited)

I haven't taken the time to properly learn about EWT yet.

It just looks as if it broken decisively out of a symmetrical triangle and will retest the low at 1.2436

 

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Edited by dmedin

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Yes, I think you were right.  Glad I closed out on Friday :)

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