GBPUSD: Devious?….No, Clear as Water!

Sophia Todorova has a background in teaching and psychology, and as such relishes the idea of assisting new traders on their journey to Forex trading success. Technical Analysis is her passion. The charts speak, and she listens.

 

 

The past few weeks have certainly been patience-testing in the Forex market, with seemingly never-ending ranges. I believe that this is because the bigger timeframes, specifically the weekly and monthly have been at critical levels, and unless you pay particular attention to the bigger picture, you would have been left wondering what on earth is going on. The Gbpusd is no exception. The erratic price action on the smaller timeframes makes perfect sense in light of the wealth of information on the weekly chart below.

This pair has been trading in a triangle that started back in 2008. The trading range is part of a major bearish swing connecting the November 2007 high with December 2008 1.3460s low. As is mostly the case in consolidation ranges, there is significant resistance and support within the range itself, making the best plays entries at the extremes, whenever it moves from one end towards the opposite side. 1.5700 has shown particular chop due to a confluence of resistance (marked by the blue band). The past two weeks have cleared this level, and that would explain the cleaner moves during this period.

So how do we as traders take advantage of this kind of a setup? I personally will be on the look-out for a setup to short, preferably at the 1.6540 level, right at the triangle resistance line. It is important to remember though, that there will likely be pullbacks before it gets to that level. These pullbacks could offer good trading opportunities to buy towards the mentioned resistance. One level to watch before then is the 38.2% fibonnacci retracement level at 1.6411, which by the way, also converges with the top of the band marking major resistance. My short target, should it set up as I hope, will be the range support line at 1.5400s. In time, that should also give way for at least a retest of the 1.3460 low. The plan might sound overly ambitious, but that is the setup as I see it. However, remember that this is a weekly chart, so it could take a long time to play out.

 

So join me in watching this highly misunderstood pair! If you are interested in trading this with me, it is a good idea to follow me on twitter, since I am able to give quick updates there, and you will be able to get them instantly.

When trading always use a stop loss and calculate the proper risk management for your account. This analysis aims at providing assistance to the forex trading community here at Winners Edge Trading, thereby helping them to make informed trading decisions.

 

 

Other useful blogs:

 Forex Crunch: Usdcad Outlook Apr. 30-May 4

The GeekKnows– Daily Commentary on Eurusd

 

The following two tabs change content below.
Winners Edge Trading was founded in 2009 and is working to create the most current and useful Forex information and training available on the internet.

Latest posts by admin (see all)

Winner’s Edge Trading, as seen on:

Winner's Edge Trading in the news

  •  Hi Sayed. I think many traders prefer to stick to the technicals because trying to predict how the market will respond the the fundamentals can be tricky, whereas with the technicals, a setup is either therte or it is not, so is less subjective in that regard. Thanks for your comment!

  • Thanks, Adam. Happy trading this week!

  • Sayed Shahzad Haider

    Good Article….This means that the traders will prefer first to complete the pennant cycle and they will totally ignore the current situation which is a Double dip recession in the UK..? Or in other words the current economic situation means nothing against the technical analysis and technical reading of the charts.
    If this is so then I really wonder why then the fundamental news plays sometimes the important role in moving the currency. As a matter of fact, you are quite right because sometimes, this is particularly my experience, as Iam most of the time trading on the fundamental news, that if the outcome of the news makes a spike against the main trend then the market after taking the spike reverses and come back where it has taken the spike, On the other hand if the breakout  of news goes with the main trend then market will push further with the trend. Well this is a very serious issue, and I understand that most of the traders, are trading not on the economy of a country but they follow what the charts/candles are telling them to do.
    Thanks
    Sayed Shahzad Haider

  • You’re welcome, Traveller. Thank you 🙂

  • Traveller1712

    Thank you Sophia. i agree some how cause still little bearish towards GBP.