FaithMight

Category: Commentary

  • Healthy Dips Make For Healthy Trends

    After rallying all week to new highs at 1.7176, $GBPUSD is using the weaker-than-expected Services PMI number this morning the excuse it needs to put in a correction. But don’t be quick to call cable bearish. Nothing moves in a straight line forever and retracements are great to keep a trend healthily intact. Corrections allow new positions into the market as those who missed this move will be looking to join the party. That new demand will only add more fuel to the rally allowing $GBPUSD to move to new highs. By working down the RSI reading, corrections indicate new strength can take us to new highs.

    GBPUSD 4 HOUR CHART

    In light of the ECB press conference with Governor Draghi this morning, $EURGBP also has an opportunity to move higher on a correction too. A correction in this pair may give price the strength needed to finally crack the 0.7950 support zone that has stymied the decline in the $EURGBP for the past 2 weeks.

    EURGBP 4 HOUR CHART

    Big news day today. Don’t get caught up in the knee-jerk reactions. @50pips put it best earlier this morning,

    Trade what you see. Read also:

     

  • GBP/USD Bull Runs

    Sure, $GBPUSD has been rallying for almost a full year now. It has surmounted key psychological levels at 1.60, 1.6250, 1.63, 1.65 and 1.6750 and now the almighty 1.70. When cable closed last week at 1.7027 above the previous highs (1.6996), it was bullish. When the markets were fully open in Monday’s trading session, price surged higher. Though the rally on Monday was mostly explained by month-end and quarter-end fix flows, I had this to say

    And, in fact, the data has supported. Today’s data makes a case that not only has manufacturing picked up but is starting to really go strong. Markets like manufacturing so this data looks really good for sterling. And also puts more pressure on the Bank of England to raise rates earlier than they may want. Bullish fundamentals like this will continue to reinforce this strong bull run in $GBPUSD.

    GBPUSD WEEKLY CHART
    Green line is current price. Simple support and resistance.

    But despite fundamentals, always pay attention to price. Price is banging right up against former lows from (waaay) back in 2005-2006. With the short holiday week, cable may have peaked. Or price could run higher. She can and will do whatever she wants. For many traders who set up before this week, this is and should be a no-risk trade. But as we know, there is no no-risk in the markets. Trade what you see.

     

  • What Is A Trading Style

    A fellow trader asked:

    what do u mean by style long term short term swing trade scalping ? 🙂

    For me, trading style ultimately refers to preferred timeframes. Swing traders look at bigger timeframes, typically no less than a 4hour timeframe. A day trader will look at minute timeframes, typically no more than 60 minutes. Of course, the details vary from trader to trader.

    A swing trader is comfortable holding a trade overnight and doesn’t want or need to be active in the markets every single day. A swing trader is looking to capture much larger profits on a given position. A day trader couldn’t conceive that. A scalper is very satisfied with smaller profit targets and only wants to be in a position for a few minutes/hours.

    Position sizing becomes interesting when you start to look at the 2 distinct styles. Swing traders will typically scale into (and out of) a position to take advantage of the best price the market is giving. Because we are in a position for several days, swing traders take advantage of a market action that provides multiple optimal price points. Scalpers tend to trade their entire position size because they expect to exit the position relatively quickly. So in order to get their desired reward, they are willing to put on their entire position. It seems risky to a swing trader but holding a position for several days seems very risky to a day trader. It’s all about style.

    A scalper and swing trader could employ the same trading strategy (Fibs, pivots, support & resistance) but their styles will have very different outcomes. Figure out and trade your style. Most traders pick one. Some traders can trade both ways. Know what works for your personality and lifestyle. Then the hard part: trade thyself.

  • My Appearance on Benzinga’s #PreMarket Prep Show

    I made my debut appearance on Benzinga’s #PreMarket Prep Show last week and had a lot of fun. As a first time guest, I get to talk more about my background and tips for new traders which is always fun. Check it out!

  • Sterling Especially Strong Against the Euro

    Sterling is on steroids right now. Carney’s comments late Thursday have resonated with the market with a continuation higher against all currencies. But the GBP strength is not anymore pronounced than it is against the euro with the $EURGBP at levels not seen in almost a year.

    EURGBP WEEKLY CHART

    This full on breakout is approaching a major zone that has acted as both support and resistance with this currency pair. With Carney and Draghi engaging down very different monetary policy roads remarks, the $EURGBP has the sweet advantage of price movement based on double whammy fundamentals. These are the sweet confluences that long-term trends are made of. It is also a good reason to watch the rhetoric because any change in tone from either Draghi or Carney can stop this current bear run dead in its tracks. But until then, expect this zone around 0.7950 to determine direction in the trading sessions ahead.

  • The Cable Zones

    After a short seasonal consolidation in May, $GBPUSD starts June very tentative and hesitant around 1.6750. Because of its year-long uptrend, any weakness of late has been met with bids and, subsequently, price moves higher. However, notice also that rallies continue to be met by sellers. So who will prevail: buyers or sellers? Watch these areas of support and resistance for the answer.

    GBPUSD DAILY CHART

    A close above 1.7000 will reconfirm the uptrend and invalidate my current bearish bias. On the other hand, as $GBPUSD weakens, price targets 1.6600-1.6500. In this zone of support, price will either bottom as buyers step in to push price to new highs above 1.7000 or weakness will continue pushing prices lower still. I am a fan of the former scenario because I believe to get above the huge psychological level at 1.7000, $GBPUSD needs to consolidate still to lower levels. Given the price action, this may take all summer.

    Read also: Today’s Appearance on FXStreet’s Live Analysis Room (FMFX)

  • Today’s Appearance in FXStreet’s Live Analysis Room

    It was great to be back in the #FXRoom today with Dale Pinkert. As always, we talked all things sterling including $GBPUSD, $EURGBP, $GBPCAD, $GBPAUD, $GBPNZD and $GBPJPY and the recent behavior in these low volatility markets.

    As I told Dale, watch how sterling behaves this summer. I suspect we start to get more definitive moves after the summer doldrums.

    Check out my previous appearances:

     

  • Is There Any Correlation

    Forex traders love to compare the cross currency pairs to the major currency pairs. Even those of us who are firmly in the camp that you trade each chart in and of itself, also like to conspire every now and again. The $GBPUSD has been moving higher all year, closing last week again above 1.70. The $EURGBP, however, closed back above 0.80 after already retracing 38.2% last week. Up until this week, sterling had been trading with good strength in both pairs. Two weeks ago, both $GBPUSD and $EURGBP closed above/below their respective big fig levels. Was Friday’s divergent close a signal of a decline in sterling?

    GBPUSD versus EURGBP
    $GBPUSD in candles, $EURGBP orange line of close price

    Looking at this $GBPUSD vs. $EURGBP comparison chart, we see that these pairs tend to move inversely to each other especially during bouts of GBP strength. This rally of the last several months is no exception. With $GBPUSD already poised at the beginnings of another leg higher, the close above previous its highs is really bullish. If we see new highs in cable this week, we should see $EURGBP move towards the lows again despite the close above 0.80. Likewise, if we see new lows in $GBPUSD on a hold of 1.7050 resistance, perhaps $EURGBP confirms the Friday close and does shoot higher. Mind the calendar and trade what you see.

     

  • Cable Clues

    I came out of my long position just around break even as the bears trumpet grows louder. I was bullish on $GBPUSD when price bounced off the 50% Fibonacci level last week.

    GBPUSD DAILY CHART

    But I missed these clues when price revisited former resistance at 1.6920.

    GBPUSD 4 HOUR CHART

    On the rally last week, I failed to pay attention to the 4-hour chart. I liked how the daily chart was setting up but failed to see what the shorter- time frame was signaling. Worse yet, when price failed 1.6850 (my mental stop) I failed to exit my position. I didn’t make my mental stop a physical stop. I put too much weight in the bullish UK CPI, BoE minutes, and retail sales and not enough weight to price action.

    Moral of the story: Stick to your rules for getting out of the trade. Technicals trumps fundamentals. Journal your mistakes so you’ll never repeat them.

     

  • EUR/GBP On Trend

    I really like this break in 0.8130 today. Last week, it was support on that break of former weekly lows at 0.8160. Because $EURGBP is good to produce fakeouts, it was the 0.8130 level that would validate and confirm a true break to new lows.

    EURGBP 4 HOUR CHART

    So I was long last week and we can see several spike rallies on the above 4-hour chart. But when Friday’s price action languished below 0.8160, I became convinced that the $EURGBP remained on trend and I changed my stance.

    Despite lower prices in housing, the core CPI number released today hit the BoE’s “eyebrow raise” level of 2%. A 2% CORE CPI will have the BoE watching inflation closely this summer. If this number trends upward, Carney will have to readjust his rate raise timeline just stated recently in the Inflation Report last week. That could be very bullish for sterling and substantiate these new midterm lows.