Tag: EURGBP

Last week was a seemingly anti-climatic week. The $GBPUSD had wild swings in both directions only to really have gone nowhere. It ended the week slightly lower. The $EURGBP has broken lower but no follow through yet. $GBPJPY is also lower after it failed to make a new high after its correction but no new lows. The $GBPNZD broke its range to the upside only to be capped by the larger 1.9750 resistance level.

As the new trading week opens, sterling is on the back foot. Last week’s lackluster was indecision and the market can only remain “stuck” for so long. Something has to give and something always does. But GBP is a mixed bag. While the rally in the $GBPUSD has given way to risk for a bigger sell-off, the $GBPNZD looks poised to move higher.

The $GBPJPY has also bounced nicely off the lows.

And the $EURGBP has become a battleground between $EURUSD weakness and $GBPUSD weakness.

The release of the Bank of England minutes, retail sales and Q2 GDP this week will either sink or boost sterling. If the minutes reveal any hawkish hints, particularly any votes for a rate hike, any chance for a correction are over. However, if the minutes turn out to be another non-event, retail sales and GDP become much more important. I think it would take a miss in both those releases to turn the tide on sterling. Watch the charts. Mind the calendar. Trade what you see.

It’s nice when a trading session goes according to plan. Retracement levels were tested yesterday as sterling consolidates recent gains ahead of Thursday’s Bank of England announcement. We started the week with these charts. We staked out our levels. But it is not enough to make a plan. You have to have some conviction to put your orders on too. It doesn’t pay, if you don’t play. Position-sizing is a very underappreciated skill. It takes more discipline than you would imagine to establish a position in the market with the correct size. Too big a position and the risk may take you out before you can earn the reward. Too small a position and the reward just isn’t as satisfying for your account balance. I find that by scaling into a position, you can spread the market risk across multiple, smaller trades maximizing the best price the market is giving. Once we determine our position, the hardest part of executing any plan is the action of inaction – we wait.

We didn’t have to wait long. Thanks in part to lower-than-expected manufacturing and industrial production releases, GBP fell across the board yesterday. Days like yesterday, you don’t have to do anything. Just watch price. In fact, if you are planning each trade and trading each plan, you should experience more days where you are simply watching price move at the market’s will. When it’s too tempting to watch price action, leave the screens or risk trading carelessly.

After yesterday, we are headed into FOMC with all the charts still in play. $GBPNZD breached its Fibonacci levels so only support at 1.9350 matters to the downside on more consolidation. All other charts ($GBPUSD, $EURGBP, $GBPJPY) stand. Markets will be light and choppy waiting for the 2pm EST release time. Be aware that some market participants will take advantage of lighter flows and size up their positions. When central banks come to the stage, it is the larger timeframes that really keep you focused on true supply and demand in the market.

don’t get chopped up in low liquidity wheeling and dealing … focus on the bigger picture

— 50 Pips (@50Pips) July 9, 2014

Game on. Trade what you see.

Read also:

• More Dips, Same Trend (FMFX)
• Healthy Dips Make for Healthy Trends (FMFX)