Seasonality is an interesting trading edge. Like correlation, it works until it doesn’t.
Taking a closer look at the $GBPUSD seasonality pattern: the pair rallies for the month of April, finds a top at the end of April, and sells off for the month of May. It’s pretty incredible the reliability of this pattern. We find it playing out perfectly in the past 3 years.
Every May since 2010, $GBPUSD has sold off hard to the tune of 500 pips or more. By the end of May, cable puts in a bottom. Conversely, every April since 2010, cable has rallied only to top out at the end of the month. This April was no different. Why should this May be any different?
So here we are in the 1st trading week of May and since topping out in April at 1.5606, $GBPUSD has put in lower highs and lower lows. The swings have been very wide and very volatile. Each new low has been met with bids that push price right back to highs. But this type of volatile price action is very characteristic of cable when it is experiencing a change in sentiment and, therefore, direction. What is important to me is that cable is carving out the very definition of a DOWN trend, lower highs and lower lows, despite the volatility.
Looking at the big picture, we see where cable was going and why on the rally. I’ve laid out that bullish scenario all April long (see below).
With sellers back in the picture, the 1st target to the downside is a massive support zone on the weekly chart. This zone sees long term support at 1.5250/30, the 50%Fibonacci level of the April rally at 1.5213, the 61.8% Fibonacci level at 1.5118, and the 1.5075 support level that buttressed the rally to 1.5600. A break below all of these levels would certainly accelerate price lower. The 50% Fibonacci correction to 1.5606 suggests that cable is looking to put in a new low below 1.4830. The seasonality trend says we could very well get there. Here’s to May!
- Sterling Digest, May 7 2013: April tops, May bottoms (FMFX)
- Sell In May and Go Away? (All Star Charts)
- Sterling Digest, April 30 2013: April rallies bring May selloffs (FMFX)
- Sterling Digest, April 1 2013: the quarter for sterling (FMFX)
- Can Sterling Really Rally? (FMFX)
- GBPUSD Can Still Go Higher (FMFX)
- GBPUSD Back In Play (FMFX)
Sterling Digest, May 7 2013: April tops, May bottoms
Posted by faithmight on May 7th, 2013 at 2:10 am, Comments: 0
Cable ended April hitting the 50% Fibonacci retracement level to the PIP. Pretty impressive for a 30-day rally. As $GBPUSD tops out at 1.5606, it [...]
Sterling Digest, April 30 2013: April rallies bring May selloffs
Posted by faithmight on April 30th, 2013 at 12:23 am, Comments: 0
Today is the last day of the month and sterling has enjoyed April. $GPBPUSD closed last week at 2-month highs with a rally that finally [...]
Sterling Digest, April 23 2013: bears in bulls’ clothing
Posted by faithmight on April 23rd, 2013 at 2:20 am, Comments: 0
It’s the last full week of April. Then the bears come in. “Sell in May”, as they like to say. Sterling has been enjoying a [...]
Sterling Digest, April 16 2013: terror attacks
Posted by faithmight on April 16th, 2013 at 5:22 am, Comments: 0
GBPUSD Back In Play
Posted by faithmight on April 15th, 2013 at 2:47 pm, Comments: 0
Here is an chart update for “GBP/USD Can Still Go Higher” posted last week. Buys were never initiated (for me) with price above 1.5300 last [...]
Euro Strength Is Ridiculous
Posted by faithmight on April 14th, 2013 at 12:49 am, Comments: 0
GBPUSD Can Still Go Higher
Posted by faithmight on April 8th, 2013 at 11:43 am, Comments: 0
Last Friday, $GBPUSD moved beyond the 1.5250 resistance that has capped rallies since February. This price move is pretty significant and sets cable up for [...]
Sterling Digest, April 8 2013: freedom to grow
Posted by faithmight on April 8th, 2013 at 5:39 am, Comments: 0
As expected last week, sterling has strengthened though mostly on the back of weaker fundamentals elsewhere in the world. The weaker-than-expected US jobs report helped [...]
More Evidence of Sterling Strength
Posted by faithmight on April 4th, 2013 at 5:48 am, Comments: 0
Yesterday, I outlined the case for a potential rally in sterling via the $GBPUSD currency pair. But there are other sterling pairs that are also [...]
Lydia Idem has been investing in equities for 16 years and actively trading currencies exclusively for 7 years. Her trading style is simple and short term. With a special feel for sterling, Lydia trades almost exclusively the GBPUSD and EURGBP. You can follow Lydia on Twitter and StockTwits... More »
- Seasonality in GBP/USD
- Sterling Digest, May 7 2013: April tops, May bottoms
- Sterling Digest, April 30 2013: April rallies bring May selloffs
- Sterling Digest, April 23 2013: bears in bulls’ clothing
- Sterling Digest, April 16 2013: terror attacks
- GBPUSD Back In Play
- Euro Strength Is Ridiculous
- GBPUSD Can Still Go Higher
- Sterling Digest, April 8 2013: freedom to grow
- More Evidence of Sterling Strength