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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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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.

 

 

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?

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Sterling Digest, May 27 2013: the last week of the month

 

Gold Star lapel pin sits to the left, with the Next of Kin lapel pin on the right
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.

Read last week’s Sterling Digest.

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Sterling Digest, May 22 2013: King starts the exit

picture of BoE governor Mervyn King
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.

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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.

GBPUSD 1 WEEK CHART

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?

cable4hr

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.

GBPUSD 1 week CHART

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).

GBPUSD 1 WEEK CHART

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!

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Sterling Digest, May 7 2013: April tops, May bottoms

GBPUSD 1 WEEK CHART
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?

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Sterling Digest, April 30 2013: April rallies bring May selloffs

Slow Trek Into Recession movie poster
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.

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Sterling Digest, April 23 2013: bears in bulls’ clothing

Bears sitting for a portrait. Painter paints a bull.
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.

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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?

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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.

GBPUSD 4hr chart

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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.

EURGBP weekly chart

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.

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