Author: @faithmight

Last Week of May
It’s the last week of the month. I’ve been playing this seasonality trend in cable since April. Admittedly, May has been a much better month for me. But, alas, the edge is almost over. $GBPUSD has put in a bottom at the end of May for the past 3 years. Why should this May be any different?

If cable does put in a bottom, it begins that process this week. 1.5000 is a great level to do it at. A failure to break below the 1.4830 lows after a perfect hold of the big 50% Fibonacci level at 1.5606 will be technical reason enough for many traders to get bullish $GBPUSD ahead of Carney’s inauguration.

Topping is a process.

— Christian Gagnon (@InEgo_) May 28, 2013

Today’s price action is huge. UK CBI retail sales released today was soft. It was a HUGE miss in the largest sector of the UK economy and GBP rallies. That is red flag for sellers; a signal not to be taken lightly. Price may take another stab at 1.50. The market may even break below it. But a strong GBP on bad news (and a weak USD on no news) is not lost on me today. I’m not looking to sell on this rally as I was weeks earlier. Watch how price behaves at lows. Bottoming is a process too. Will $GBPUSD bottom again this May?

Mentioned above:
- Seasonality in GBP/USD (FMFX)
- Sterling Digest: April tops, May bottoms (FMFX)
- Sterling Digest: April rallies bring May selloffs (FMFX)
May 29, 2013
Sterling Digest, May 27 2013: the last week of the month
Symbols for fallen Servicemen

Memorial Day was started by freed slaves who sought to honor Union soldiers who had died in the Civil War. It is a day we all pause and think about what service in the military means for freedom. It also marks the beginning of summer; and a holiday shortened trading week. There is very little on the economic calendar from the UK again this week. Lots of releases scheduled out of the US however. USD positioning and flows will certainly grip the forex market again this week. That makes the $GBPUSD a prime opportunity. It also makes the $EURGBP a bit of a battleground. Pick your poison.
- How Mervyn King Lost the Battle of Britain’s Banks (WSJ)
- BERNANKE GREEN LIGHTS DOLLAR RALLY (BK Asset Management)
- Osborne’s deficit continues to grow (NewStatesman)
- Sterling Stumbles as Disinflation Accelerates; Light Week Ahead (Yahoo! Finance)
- Mervyn King: More Common Sense (to the tick)
- BOE’s Broadbent: UK growth still below potential (FxBriefs)
- EUR/GBP – Poor UK Data Helps Spark Breakout (Globalfxclub)
- GBPNZD Daily Chart – Price has found support at the ascending TL (Facebook) [CHART]
- Memorial Day: Early history (Wikipedia)
Read last week’s Sterling Digest.

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May 28, 2013
Sterling Digest, May 22 2013: King starts the exit
King’s last stand

The $GBPUSD is now 2 weeks into May and its seasonality trend is still in play. These are the times traders sit on their hands and do nothing to allow their winners to run. Sell in May has never rang so true. Fundamentally, BoE Governor King used his final inflation report to start the exits from the Bank of England. Last week’s speech might have been the 1st time that sterling ever rallied on comments from Governor King. Nonetheless, $GBPUSD opened this new trading week below 1.5230 signaling further losses ahead.
- Seasonality in GBP/USD (FaithMightFX)
- GBPUSD flag pattern may be in play (StockTwits) [CHART]
- The charts I am looking at right now (FACTOR) [PDF]
- GBP/AUD – Major Trend-line in Jeopardy ahead of UK Data (GlobalfxClub)
- UK Market Open (Reuters) [VIDEO at 2:20 mark]
- The British Pound Is A Bargain (Seeking Alpha)
- Is the UK facing a fiscal crisis? (FT Alphaville)
- UK retail sales april: m/m -1.3 % vs 0.0% exp (Forex Live)
- BOE MPC minutes: vote on holding QE 6-3 vs 6-3 prev (Forex Live)
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May 22, 2013
Seasonality in GBP/USD
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!

Read Also:
May 9, 2013
Sterling Digest, May 7 2013: April tops, May bottoms
May selloffs

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 begins the 1st week of May with a lower high (as of this writing). Seasonality trends would have traders note that cable has topped out in April each of the last 3 years. In May 2010, cable was below 1.55 and fell to brand new long-term lows by the end of the month. $GBPUSD finds itself in a similar situation with price action only 40 pips above 1.5500. This week’s BoE rate decision will be closely watched thanks to the RBA’s long-awaited interest rate cut. Most still think the BoE holds policy until Mark Carney takes the helm so Thursday’s event could be a non-event. As such, sterling could be a mixed bag. The ECB, RBA, and BoJ are clearly dovish while the BoC and RBNZ are hawkish. The Fed is on watch but positive data continues to build the case for a strong USD. The BoE’s decision sets the tone for sterling the next 30 days. Which way will the Old Lady lean?
- Reason for hope – Bank of England deputy governor Paul Tucker (The Journal)
- George Osborne tells FPC to focus on short-term growth (Telegraph)
- Reserve Balances for UK Banks Increases by 2.3% in April to Reach New All-Time High (EcPoFi – Economics, Politics, Finance)
- Has there been a double dip recession? (Office of National Statistics)
- Cable pulled down by the euro’s vortex of suck (Forex Live) [chart]
- UK government riding the bubble (Forex Live)
- Outlooks & Strategies For EUR/USD, And GBP/USD – Barclays (eFxnews)
- Devaluing the pound won’t do what its advocates want it to do (Adam Smith Institute)
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May 7, 2013
Sterling Digest, April 30 2013: April rallies bring May selloffs
Could GBP’s best days be behind it?

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 took it above 1.55 to 1.5546. $GBPAUD rallied to new highs above the 1.50 major psychological level not visited since Feburary. $GBPCAD moved to spike highs at 1.5823. Needless to say, its been a breakout month. Despite the bullish price action, sterling is still very much correcting on long-term timeframes. All the aforementioned pairs are at or around the 50% Fibonacci levels on the weekly charts. And tomorrow is May. For the last 2 years, $GBPUSD has seen a tremendous sell-off in May. Being at new highs and technical levels sets sterling up for a fall more dramatic than its rally.
- GBP recovering, CHF falling, banks rising…we connect the dots (FxBriefs)
- UK retail sales show surprise fall (The Guardian)
- GBP/USD set to extend gains..? (FxBriefs)
- Sell in May and Go Away? (All Star Charts)
- the serious change in economists’ expectations for ECB rate decision (StockTwits) [CHART]
- Fitch cuts the Old Lady to AA+ (FxBriefs)
- Equally impressive move in GBP/JPY (Forex Live)
- Forex Outlook – Action Packed Week Ahead (BK Asset Management)
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April 30, 2013
Sterling Digest, April 23 2013: bears in bulls’ clothing
Pound Sterling

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 nice corrective rally all month. I championed the new bullish sentiment on the blog here and here. But the bull shine could be starting to fade. $GBPUSD has many traders calling a top. Fitch downgraded the UK economy late Friday and $GBPUSD opened the week to drop to 1.5200 while $EURGBP spiked to 0.8590 highs. However, the weakness has been short-lived. Once the Monday trading session commenced, sterling found its legs rallying across the board. $GBPAUD staged a breakout in Monday trading. There are some reasons. Fitch’s downgrade is old news. Poor economic news news lately is not translating to much lower prices. With the economic calendar very light out of the UK this week, sterling could be a mixed bag to finish the month.
- Shorting GBPUSD ahead of top of range (TradingFloor.com)
- Positions Tracker: Natixis, Barclays, Credit Suisse, Commerzbank All Short GBP/USD (eFXnews)
- Cable nearing bids after drop but case for downside growing (Forex Live)
- No Further BoE QE Until August – JP Morgan (eFXnews)
- Monetary base (The Really Real Economy) [CHART]
- Fitch Downgrades UK Credit Rating (City Index)
- Osborne Suggests an Independent Scotland Wouldn’t Keep Pound (Bloomberg)
- Philly Fed Misses, BOE’s Weale Dovish (AshrafLaidi.com)
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April 23, 2013
Sterling Digest, April 16 2013: terror attacks
Iron Lady rightfully(?) kicking the King of Capitalism

What happened Monday? What a trading day. Commodities fell off a cliff in a real scary way. $GBPAUD, $GBPNZD, and $GBPCAD rallied over 200 pips in yesterday’s trading session as those commodity dollars took a major hit along with $GLD, $SLV, and $CL_F. It was incredible. Then bombs exploded later Monday morning during market hours in Boston. Another terrorist attack in the United States. The USD rallied slightly on the news as $GBPUSD tumbled below support but in today’s trading session cable looks bullish again. The markets feel a bit more stable today as the sterling continues to firm except versus the euro. $EURGBP has taken out major resistance at 0.8570 as it has rallied to new highs so far today at 0.8582. What is the world coming to?
- Gold price crashes (City AM)
- New low in pound net spec futures positioning (StockTwits) [CHART]
- Slovenia Not in the Danger Zone: Pro (CNBC) [VIDEO]
- Britain is more credit worthy than China (FxBriefs)
- UK growth back at trend rate, OECD says (Telegraph)
- Billions of pounds of QE unlikely to cause inflation – IMF (Telegraph)
- France plans currency swap line with China: paper (Rueters)
- Bank of England has ‘no new toys to play with’ to boost economy (Telegraph)
- Margaret Thatcher’s death on newspaper front pages – in pictures (The Guardian)
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April 16, 2013
GBPUSD Back In Play

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 week. Sellers never got going either with strong bids at 1.5300 keeping price propped enough to make new highs above 1.5400. Strategy now in play with $GBPUSD breaking 1.5300 support of last week in early Tuesday (New Zealand/Sydney) trading. Read full analysis for key levels.

April 15, 2013
Euro Strength Is Ridiculous
Analysts called for $EURGBP to firm since Cyprus blew over. I couldn’t believe it. After Cyprus then Slovenia and Portugal scares, calls for the $EURGBP to make a new daily high were ridiculous to me. So much so that I wasn’t comfortable going long EUR. So I didn’t. However, the strong close on Friday at 0.8541 after holding 0.8490 that day was the confirmation for me that price is in fact moving higher. I try very hard to trade only what I see. Even if some one else saw the rally before I did, I could only buy euros comfortably after price confirmed what most were starting to see. The target above 0.85 is a new daily chart high above 0.8800.

To start the new week, the key levels were 0.85 to the downside and 0.8570 and 0.86 to the upside. Monday, price held 0.85 on a dip to 0.8515. Yesterday, $EURGBP broke both resistance levels. Now today following the release of poor UK employment numbers, $EURGBP has made new week highs at 0.8637 (at the time of this writing). Key levels from here are now 0.8600 to the downside and 0.8670 and 0.8750 to the upside.

During the Cyprus fiasco, I didn’t think EUR could recover. I thought the party was indeed over. This euro strength is ridiculous. But even ridiculous can make money.

Mentioned here:
- TOP 3 FOREX TRADES FOR Q2 (BK Asset Management)
- Slovenia Not in the Danger Zone: Pro (CNBC)
- The Other Side of The Euro Party (FaithMightFX)
- Sterling Digest, March 17 2013: dangerous precedent (FaithMightFX)
April 14, 2013