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GBPUSD retrace trade


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Unlike other major USD pairs GBPUSD has already broken out but is now either in a Flag consolidation or a deeper retrace to retest the breakout levels.  Perhaps election uncertainty is in play and we will get a resolution (to many things I hope) on Dec 12.  

GBPUSD-Daily_231119.thumb.png.90ccb67b3d60baa587fcb2da5260935b.png

 

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@Mercury & @dmedin- Thanks for sparking this chat back up again. I feel like with everything going on with Brexit (focusing on EURGBP) and trade war we sometimes forget about Cable movement. DailyFX have wrote their thoughts on cable. Something you might find interesting, let me know :) 

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GBP/USD: Overtaking This Price Could be a Game Changer- British Pound to USD Outlook

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I remember being told in school that there would never be a radical government in Britain because of the capital flight that would result.  That was back in 1998 or 1999 I think.  It's a bit strange how, 20 years later, the Labour party is putting forward those views that I had in school. 

For me this reinforces the idea of cyclicality or the recurrence of things that happened in the past ... very fascinating stuff.

I'm still long on the pound though.

Edited by dmedin
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Thanks for that @CharlotteIG, my analysis is similar in that I have a turn and breakout on GBPUSD and current consolidation, probably in a Flag, which suggests a continued rally on breakout.  I believe this is overall a counter trend rally and the long term trend remains bearish.  Naturally the UK election, Brexit new referendum or not, Marxist based government or not, Scot,and indyref2 or not is cause for concern but I imagine USD weakness might supersede this to some extent.  My EURGBP analysis is indicating a period of EUR dominance to come soon, which may also be attributable to the UK political situation, at least short to medium term.  therefore I prefer to trade EURUSD rather than GBPUSD, although I did trade the initial breakout but have cashed for profits.

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9 minutes ago, Mercury said:

Thanks for that @CharlotteIG, my analysis is similar in that I have a turn and breakout on GBPUSD and current consolidation, probably in a Flag, which suggests a continued rally on breakout.  I believe this is overall a counter trend rally and the long term trend remains bearish.  Naturally the UK election, Brexit new referendum or not, Marxist based government or not, Scot,and indyref2 or not is cause for concern but I imagine USD weakness might supersede this to some extent.  My EURGBP analysis is indicating a period of EUR dominance to come soon, which may also be attributable to the UK political situation, at least short to medium term.  therefore I prefer to trade EURUSD rather than GBPUSD, although I did trade the initial breakout but have cashed for profits.

I see what you mean and appreciate you sharing your trades. 

17 minutes ago, Mercury said:

I did trade the initial breakout but have cashed for profits.

^ 👍 Glad to hear! :) ^

We have news for each currency pair but not relevant to each other which makes deciding on a direction hard (if you're not using technical analysis). 

I wonder if anyone is going to be getting involved with the cable trade during brexit and trade war announcements and if they are how are they deciding which way to go.  

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@Mercury

I had been looking at hourly charts, against my own resolution not to, and the price decline looked drastic on that time scale for GBP.  But on a daily chart it looks far more reasonable.  I still kind of wish I wasn't sitting on a long though.  :D

 

Edited by dmedin
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1 hour ago, dmedin said:

I still kind of wish I wasn't sitting on a long though.

Depends on where you entered.  If you entered Long below the weekly channel line, ideally on the first retrace (12200-12400) then holding stop protected at BE is the right strategy for me.  If you entered above the current price, well I would already be out but we may be seeing an FX turn this morning.  My method rules enforce taking losses quickly on a reversal vs my route map and seeking a reentry rather than holding a deeper drawdown in the hope it turns eventually.  Lose small win big.

Regarding 1H vs Daily, I have found you need to look at both but best to ignore 1H sudden candle moves and focus on the trend as it is reflected on the Daily.  This is for longer term trading, obviously shorter term traders may be all over 1H candles. 

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On 01/10/2018 at 10:38, Mercury said:

Thanks for the comments @elle  I am not sure if your chart is supporting my assessment or suggesting a bounce off your hashed line is showing a Bearish move.  It could certainly be the case that GBP (and EUR) has put in a more shallow retrace and is now on it's way into that LT motive Bear move I was talking about.  A break of the recent lows would confirm this for me.  At present I still favour a higher retrace for both EUR and GBP but let' see...  Right now we are seeing some buying pressure on both GBP and EUR but I am not sure yet if the Wave B is done.  Got to be patient as these moves develop and wait for the trade triggers...

Very interesting and long term chart analysts Mercury. Why is it that we think that charts follow these types of patterns? Would It be right that traders have the maps "CA" and we all tend to follow? Please inlighten me your thoughts? Good work on the history plotting.   

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On 27/11/2019 at 23:44, Trevbeats said:

Very interesting and long term chart analysts Mercury. Why is it that we think that charts follow these types of patterns? Would It be right that traders have the maps "CA" and we all tend to follow? Please inlighten me your thoughts? Good work on the history plotting. 

Not sure I fully understand your question @Trevbeats so if I have got the wrong end of the stick please let me know.  In terms of chartist patterns, this is well documented charting techniques (e.g. consolidations, retraces, Head & Shoulders, Double top/bottoms etc.).  In terms of other technical analysis that I overlay onto basic charting techniques (e.g. trend lines, Elliot Wave Theory -EWT- etc) that is partly a visualisation technique and, in the case of EWT and charting techniques, a means to map market participants sentiment as it expresses human nature (Fear and Greed).  People who use such techniques believe that while history may not actually repeat itself the circumstances impacting decision making do and human nature is largely unchanged over time.  Therefore market participants (people, even those who program the algos) react in similar ways to similar circumstances through the lens of the Fear/Greed seesaw, which itself is a form of fight or flight.  One reasons large financial institutions (and some smaller players too) attempt to deploy purely algorithmic trading mechanisms is to avoid this fight or flight emotional overlay.  Inr eality though the programmers are human and constantly adjusting the algo parameters and we are not talking about machines or AI making up their own mind here as Algos are not AI and in fact humans, some surmise, are also algorithmic machines, just biological ones.  This is at the heart of studies like Kahneman's Thinking Fast, Thinking Slow.

I cannot speak for the markets as a whole, except to say that there are many methods being deployed so I don't buy into the self fulfilling prophesy argument, at least not as a general rule.  At best I think all macro analysts and long term position takers have a road map in the sense that they have an entry and exit sketched out but not all will have it on a chart as I do.

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On 30/11/2019 at 11:11, Mercury said:

Not sure I fully understand your question @Trevbeats so if I have got the wrong end of the stick please let me know.  In terms of chartist patterns, this is well documented charting techniques (e.g. consolidations, retraces, Head & Shoulders, Double top/bottoms etc.).  In terms of other technical analysis that I overlay onto basic charting techniques (e.g. trend lines, Elliot Wave Theory -EWT- etc) that is partly a visualisation technique and, in the case of EWT and charting techniques, a means to map market participants sentiment as it expresses human nature (Fear and Greed).  People who use such techniques believe that while history may not actually repeat itself the circumstances impacting decision making do and human nature is largely unchanged over time.  Therefore market participants (people, even those who program the algos) react in similar ways to similar circumstances through the lens of the Fear/Greed seesaw, which itself is a form of fight or flight.  One reasons large financial institutions (and some smaller players too) attempt to deploy purely algorithmic trading mechanisms is to avoid this fight or flight emotional overlay.  Inr eality though the programmers are human and constantly adjusting the algo parameters and we are not talking about machines or AI making up their own mind here as Algos are not AI and in fact humans, some surmise, are also algorithmic machines, just biological ones.  This is at the heart of studies like Kahneman's Thinking Fast, Thinking Slow.

I cannot speak for the markets as a whole, except to say that there are many methods being deployed so I don't buy into the self fulfilling prophesy argument, at least not as a general rule.  At best I think all macro analysts and long term position takers have a road map in the sense that they have an entry and exit sketched out but not all will have it on a chart as I do.

 

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Regarding $£ pair and direction over near and medium term, I concur with your position that £sterling has bottomed and has only one way to go : sideways (only joking). The £ has been historically low  since 2016 and has reached its nadir, it is fair to suggest. Brexit bashing has done its worst, though we may not have seen the last of it and the future relationship with Europe will not be as smooth and easy a negotiation as some would wish. Sterling is priced as cheaply as is reasonable atm though others may suggest undervalued as compared to all other currencies. 

The election may not be as decisive as the polls suggest. Infact, BloJo may win but with the slenderest of majorities. He is gaffe prone and entirely self serving so the majority may not last long. However, the economy will continue to trundle along, doing well enough and out-performing many other indices.  It may well continue to do so.

Regarding possible market readjustments, we are due one, dare I say overdue. Sterling is a reliable currency. In a down turn it would do  well. Also, in order to pay for the inordinately vast spending plans interest rates may need to rise, by a point or two probably. 

In short, I agree, a long position on Sterling is a viable strategy all the way past 1:50 and beyond, same regarding euro position 1.17 will quickly become 1.30 regardless of Brexit and future relationships.

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I lucked out in the GBPUSD trade.  I was $3670 in the red short when it opened in the AM.  It immediately dropped in price, allowing me to get out without a scratch.  I unfortunately on Monday I got slammed and am $14K in the hole and held prisoner by AUDUSD, NZDUSD and AUDJPY.  I traded too large, without stops and too many pairs.  Will never repeat folly again.

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GBPUSD is testing the upper consolidation Flag line and approaching a key resistance zone (13,000).  If we see a strong breakout here then the next phase rally will be underway.  EURUSD is also approaching a key resistance zone and AUDUSD continued its rally phase overnight.

GBPUSD-Daily_031219.thumb.png.c1fba201de2375dccb685445e7ae7733.png

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Nice breakout this morning, still to be confirmed with a close above but very encouraging.  I expect to see a similar breakout on EURUSD and USDJPY moved lower overnight (still have a recent low to eclipse just below).  Stage seems set for the USD bear to get going...

GBPUSD-Daily_041219.thumb.png.0ffb323b751bfd0f77176e0fb8c29c3f.pngGBPUSD-1-hour_041219.thumb.png.2d0583f0868e1bdf5d38b28586f78e3b.png

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GBPUSD looks to have put in a next phase breakout, or at least is in the process of.  The uncertainty surrounding next Thursday has to be considered in terms of potential short term whipsaw and spikes.  Outwith that I would be expecting perhaps a USD led retrace on GBPUSD for a retest of the $1.30 level before the next phase rally gets going, which may have to wait until the election result of some impetus around and about the election.  My feeling is that if we get a clear majority result (which can only be a Tory one it seems) then uncertainty is lifted, perhaps also relief that a Marxist orientated government has been avoided, and GBP rallies on clarity alone, plus ongoing USD weakness.  However if we see anything else then the reverse will be the result.

GBPUSD-Weekly_071219.thumb.png.e87aa54d819a98c32a5332c906a81168.pngGBPUSD-1-hour_071219.thumb.png.1492b1fbfe3039937ed7e4294f2ed81e.png 

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1 hour ago, dmedin said:

Gap filled ... maybe further to fall?  Just goes to show how untradable these things really are.

Depends on how you visualise it and spot turns.  I was looking for a 3-4 and maybe a retest of the Flag breakout however when the election result caused a large gap (only on the 1H) and the market stalled the day after, with a likely USD relief rally in play I went Short tactically to the Gap close you mentioned and cashed.  Now I am looking to see if we get a wave 4 turn here or a retest of the Flag breakout.   I favour the former scenario as it fits my longer term view.  So for now, unless and until price action provided an alternative, I see GBPUSD turning into a rally to complete the larger wave 1 (blue), which should complete at twice the Flag median point (not withstanding spikes) so that's $1.38-1.40 as a target.  After than we should see a retrace wave 2 that should, if everything has progressed according to the scenario, react back to the Fib 50% and a retest of the Flag support zone.  For this to happen though I would expect a general USD turn down, although there is nothing to stop GBP diverging as it has done in the past.

GBPUSD-Daily_171219.thumb.png.a9031b8903c5ace25b4d848d57c1d788.png

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GBP collapsing - fundamental situation identical to election night.  Why are retail traders even allowed to bet on such heavily manipulated/rigged markets?  Can anyone show me any kind of TA that actually works in forex?

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