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The One That Got Away

The $EURGBP has been rangebound between 0.8600 and 0.8470 for 10 weeks. While impressive, this is not uncharacteristic of this currency pair. When it fell below 0.8500, it lingered at the bottom of the range for 3 days. I expected a continuation to the downside after the 3rd day of still pivoting around, and mostly below, 0.8480. I bailed out of a long position hours before the $EURGBP finally broke to the upside respecting the range.

EURGBP daily chart

Now, the pair is at the top of the range moving as high as 0.8575. As long as price closes daily below 0.8600, the range remains intact and we’ll see a move back to 0.8500. This time, I will be more patient.

 

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GBPAUD Finds A Top

The $GBPAUD breakout has been epic. It was one of those amazing rides that you only participate in in portions. There is not a trader who captured every single pip of this move. There are many who did, however, rake in a killing take portions of this gigantic trend wave that broke out to new 2-year highs.

GBPAUD WEEK CHART

Looking at the weekly chart, it is interesting to note that this is only a 1st bullish wave. Now after 10 bullish weeks, we are starting to see a pullback. The RSI is severely overbought and has been for several weeks now. So a top was not only inevitable, it was necessary.

GBPAUD 4HR CHART

Watch 1.6380 today. Price has bounced from this support level before. If we can get below 1.6380, then price will move toward 1.6270, the 50% Fibonacci level of June’s rally and previous support. From there, price will confirm this new AUD bear trend or allow for a deeper correction still.

 

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Sterling Digest, June 11 2013: sterling recovery

Cartoon from Leadbelcher on flickr
Was King right? We’ll never know.

Sterling has broken out across the board to new highs in an amazing display of strength. Last week’s BoE decision to keep monetary policy unchanged was a huge boost for sterling. It was also the last BoE meeting under Governor Mervyn King. King has drawn criticism from many market participants especially since the dawn of the 2008 financial crisis. The irony, however, is that the UK economy may be enjoying a recovery just as he retires and steps down.

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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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