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Author: @faithmight

Lydia Idem is an investment advisor who has been an investor and trader for 23 years. She has been a special guest on TD Ameritrade Network and Benzinga’s #PreMarket Prep Show; featured in FORBES Magazine and CNNMoney; and co-author/contributor to The StockTwits Edge and Trading: The Best of The Best. In 2014, she launched FM Capital Group LLC, a registered investment advisory firm serving people of color. Lydia was recently named #22 of the Twitter Accounts Investors Need to Follow in 2017 and #3 of the Top 10 Women To Follow In Finance for 2015. Lydia has a Master of Science in Management (Georgia Institute of Technology) and a Bachelor of Science in Computer Science (Vanderbilt University). Follow me on Twitter: @faithmight Follow me on Instagram: @faithmight Follow me on Facebook: fb.com/fmcapitalgrp
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Nothing Moves In A Straight Line

This breakout rally from 1.55 has seemingly moved in a straight line up. There were very little corrections during this breakout. However, the correction that has started in the $GBPUSD last week has gathered steam today as cable falls below the major psychological level at 1.60.

GBPUSD DAILY CHART

The USD is gathering strength as US interest rates rise (most likely in anticipation of an eventual taper). However, the bullish bias in $GBPUSD doesn’t completely unravel until 1.57, the 61.8% Fibonacci level of this entire breakout rally. Before that level is the major 1.5750 level that capped rallies all year long before this recent breakout. With a light calendar week, it is very likely that $GBPUSD corrects back to the next major level at 1.5750. From there, it is decision time for bulls and bears.

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Reversal in the Making (FMFX)

GBPUSD Update (50’s Blog)

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Reversal In The Making

I have been saying all summer that if the $GBPUSD holds above 1.55, then we’d have the beginnings of a reversal in cable. Here we are now with $GBPUSD above 1.60 and a full-blown reversal before us.

 GBPUSD daily chart

After 3 bullish waves (4 on this daily chart), $GBPUSD should be technically exhausted. So this correction back towards 1.60 is healthy and even expected.

GBPUSD 4hr chart

A hold above 1.60 has always been traditionally bullish for cable. Why should 2013 be any different? Despite the pullback off Wednesday’s highs, cable is poised quitely nicely  to make a run for the highs.

GBPUSD weekly chart

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Australian Dollar Puts In A Bottom

The AUD was the darling currency of the last several years benefiting most from China’s rapid growth rates. The tables turned in 2013, however, as the darling of the forex market became a dog. The $GBPAUD rallied over 3,100 pips on AUD weakness just shy of 1.75 with a high of 1.7482. It had not traded at those levels since 2010.

GBPAUD WEEKLY CHART

The weekly RSI is very interesting here. There is a divergence here that has been developing for several months now making it a powerful indicator that, now after some time, $GBPAUD bulls are throwing in the towel.

GBPAUD DAILY CHART

The price movement in the orange channel back in July has been the only “bearish” move in $GBPAUD since April. Since, the pair moved well beyond the 1.6916 July high to make highs last week at 1.7482. The pullback last week turned into a legitimate bearish move with lows breaking the 61.8% Fibonacci level at 1.7061 and moving below the big psychological level at 1.70.

The fundamentals certainly do support a bottom in AUD weakness. Last Tuesday, the RBA signaled an end to outright easing. Much of this breakout rally was due to RBA dovishness and interest rate cuts as other central banks remained unchanged in their monetary policies. Now that the RBA has shifted sentiment, the AUD may be due a significant relief rally.

GBPAUD DAILY CHART

With the break below 1.70, there are 3 support levels to watch in the coming sessions.

  1. 1.6916 is the former July high now turned support. We can see price has found support at this level twice before in August.
  2. The 50% and 61.8% Fibonacci levels at 1.6812 and 1.6653 respectively.
  3. The July low at 1.6141. A break below this level would mean a serious unraveling of this tremendous 2013 rally.

This is the potential of this breakdown:

GBPAUD WEEKLY CHART

Needless to say, we have a long way to go but if the fundamentals continue to improve for the AUD, the 1.5930 level could very well be reached.

Trade what you see.

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Is GBP/USD Still Bullish?

Getting a lot of questions from traders this morning (PST) asking why the GBP is falling across the board when UK 2Q GDP came out higher-than-expected. There are several reasons.

1. The market can do whatever it wants.

The move could have been caused by profit-taking, swing buyers, or position-sizing. It doesn’t matter. Trade what you see, not what you think. The market doesn’t have to rally on good numbers and doesn’t have to fall on bad. Know your levels and trade what price is actually doing.

Not all dips are acts of weakness.

GBPUSD DAILY CHART

 

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Sterling Digest, 23 August 2013: reality bites

Free stress test. Cool photo on Flickr
Are the markets telling us something?

Carney was supposed to be bearish for sterling. He was supposed to do some monetary magic that would weaken sterling to levels that would jumpstart industry in a stagnate British economy. There is just one problem with that. The story changed. When Carney accepted the position, the British economy was a very sad one. But that is not today’s scenario 6 months later. Numbers have been robust. Optimism is starting to creep in. Headlines are honestly hopeful. But let us not get too ahead of ourselves. The latter part of 2013 is yet to unfold. With sterling moves higher on yields (which are moving higher on growth), the question remains is if this growth is sustainable and repeatable. The uncertainty around this answer plays out as a grinding market for now. The moves are choppy but very well bid into some major resistance levels. ACROSS THE BOARD. $GBPAUD has seen 1.75; $GBPNZD targets 2.00; $GBPUSD has flirted with 1.5750; and $EURGBP remains supported by 0.85. The $GBPCAD weekly chart is unbelievable with price right at long-term resistance at 1.64. Incredible strength in sterling in the middle of August seems a little too good to be true. Wait for September.

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Respect The Zone

Yesterday, the sterling market experienced a flash rally where an “erroneous” order was filled to buy yards of GBP versus EUR. This sent $EURGBP crashing down to a low of 0.8535 and the other GBP crosses spiked higher. Despite this fat finger, $EURGBP broke a huge level for the pair at 0.8570.

EURGBP DAILY CHART

As mentioned over 3 weeks ago,

Of particular interest is this zone between 0.8600 and 0.8570. It has been a buy zone when $EURGBP has traded above it and a sell zone when the pair has traded below.

When we traded below the zone yesterday on the spike lower, this zone changed from a buy zone to a sell zone.

True to the zone, price was capped by the 0.8600 level with a high today of 0.8598 off yesterday’s 0.8535 lows. We now have follow through to the downside with $EURGBP trading at 0.8545 (as of this writing) and looking to move lower. Expect any rallies back into the zone to be met by offers unless price manages to close back above 0.8600.

Trade what you see.

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Sterling Digest, 13 August 2013: mixed post guidance

DJ mixing sound board
Carney remixes guidance for UK

Sterling has been mixed since the announcement of forward guidance giving the Bank of England (BoE) a dual mandate to target both inflation and unemployment. It also means that economic data takes on increased importance as markets parse news to determine central bank sentiment and direction in price action. However, sterling has been mixed in the week after forward guidance was unveiled. Last week, GBP rallied across the board post-announcement taking $GBPUSD to 1.5571 and $EURGBP to 0.8578. In this new trading week, however, GBP has weakened considerably off those highs. The spotlight of this week will be the release of the BoE meeting minutes which will give the market a peek into the central bank’s true sentiment on forward guidance. Given the unanimous vote last month not to increase QE, a split vote threatens to weaken the GBP and increase volatility in the near term.

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Timing Is Always Important

Sterling has completed some big time levels in the past week. $GBPUSD hit one-month highs at 1.5571. $GBPAUD broke out higher to 1.7340. And $EURGBP mean reverted back to 0.86 after hitting 5-month highs at 0.8750. I say all that so you can understand why I’m very much on the defensive into this new week. It is important to recognize how likely it is that these particular pairs start the week consolidating these major moves.

With the $GBPUSD linked to the almighty USD, cable will certainly lead. Opening below 1.55 signals weakness that could be short-lived as the Monday session gets underway. 1.5430 resistance-turned-support and the 1.5400 50% Fibonacci level of the rally from 1.5102 to 1.5571 are the key levels of support to watch now at the market open. $EURGBP below 0.8600 has 0.8570 as key to direction. The loss of 1.6925 resistance-turned-support signals further losses toward 1.6750 in the $GBPAUD.

If you enjoyed these major moves, take a seat back. If you missed these major moves, take a seat back. Timing is a critical factor in our trading. Be mindful of the timing: big moves, August trading, and new shifts in some of the major central banks. There is no need to rush or force trading, today, in particular. Often times, the best opportunities in the market are those you can wait on.

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Reversal Territory

Last week, I started to have a more bullish stance on $GBPUSD. Price had to get back to 1.5000 or it would start to target 1.5500. Cable gave traders plenty of clues last week, however, the market waited on the BoE . Yesterday, Carney served up his own flavor of forward guidance: hard guidance complete with a dual mandate of inflation and unemployment and complete with 3 exit clauses for wiggle room. Genius. He effectively talked down rates while signaling no more QE and sterling loved it. $GBPUSD finished the business with a new high after holding the Fibonacci levels.

GBPUSD DAILY CHART

The inflation report caused severe volatility in the markets but despite the high volatility, cable managed to hold the 61.% Fibonacci level of the week’s rally off the 1.5100 lows with a slight overshoot and close above even the support zone (yellow). These were very bullish signals that I didn’t even trust at first because Carney was still speaking at the time. That hold though was then followed by a break above the 1.5430 highs. After breaking higher, $GBPUSD remained above 1.5430, finding support at previous resistance on a pullback before breaking to yesterday’s session highs at 1.5530.

CABLE 60 MINUTE CHART

All very technical and bullish action which supports the bulls’ case for new highs above 1.5750. While forward guidance may seem very bullish for sterling at the moment, it is how recent economic data lies on this forward guidance spectrum that is giving sterling strength. With solid numbers from both manufacturing and retail, traders feel now as though QE is no longer on the table. I’d say August is a bullish month for the $GBPUSD. However, if the UK economy fails to build on this tepid recovery, it could be very bearish, very quickly for cable. Remember, expectations for growth have actually been revised higher.

Trade what you see.

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Sterling Digest, 6 August 2013: flavors of guidance

picture of flavored salts
Which flavor of guidance will Carney serve up?

This week, it is all about the Inflation Report released tomorrow. With no statement released after the Bank of England decided not to change monetary policy, the market has been in hot anticipation of this formal forward guidance that Mark Carney will issue for England. The discussion of forward guidance has become fragmented: hard guidance vs. soft guidance; inflation target vs. GDP target. Given the state of the UK economy, it will be interesting to hear what Carney has to say in his 1st inflation report. Even more interesting will the be the market reaction. Yesterday’s strong retail sales caused sterling to rally hard across the board. Today, however, sterling has weakened after strong manufacturing numbers were released. Either the market is running out of steam or it is already looking ahead to tomorrow’s inflation report.

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