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
Winner’s Edge Trading, as seen on: