Previous Story
Short-term Trading Idea FX GBP/USD – Bull Speculation: Expected Pound Strengthening to 1.4565 via Bounce
Trading opportunities for currency pair: the body of the last candle almost completely closed off the previous candle. Up to now, whilst the GBP/USD is trading above 1.4011, the risks of a return to 1.4565 are high. With the current candle formation on the weekly timeframe, we can put limit orders to purchase the pound at 1.4060/80 and stop orders above 1.4305. This growth idea for GBP/USD will cancel out with a close of the weekly candle below 1.4011.
Background
The last GBP/USD idea I made came out on 25th January, 2016. Then the pound was worth 1.4260 dollars. After the forming of a weekly candle with a small shade and long lower shade, I was considering an upward correction to 1.4565. In actual fact, the pound/dollar rose to 1.4667. The target was reached over two weeks.
From the 1.4667 maximum, the rate fell to 1.3835. The GBP weakened against the USD due to discussions about the UK leaving the EU. The referendum regarding this matter will take place in June, If the Brits vote to leave, the pound will continue to fall.
Current Situation
Now to what”s going on at the moment. The GBP strengthened 390 points to 1.4225 against the USD in a week. The pound strengthened throughout the week, ignoring weak UK stats. Business activity in the country fell in February in the manufacturing and construction sectors. A week earlier, the PMI and consumer confidence indices were down.
The GBP closed up on Friday against the dollar after the US” February NFP came out. The report came out well, but the sellers couldn”t manage to hold the daily levels.
The NFP showed a 230k rise against a forecasted 185k. January”s figures were reassessed up from 158k to 182k. December was reassessed up from 262k to 271k. The overall reassessment was +30k.
US unemployment in February remained at 4.9%. Population employed increased by 0.2% to 62.9%.
With more people employed, the pound/dollar reacted by falling 40 points to 1.4106. There were some negative stats too: the index for hourly wages was down 0.1% (forecasted +0.2%, previous: +0.5%).
It was very surprising that the USD was down by the end of the day after strong data and just one set of negative stats.
What”s of interest at the moment?
The buyers managed to partially win back their losses over a week. The body of the last candle almost fully closed off the body of the previous one. Look how the situation in April of last year or in June of 2013 developed. Now we have a similar situation, just it”s not clear if the bulls will lift the rate before the UK”s referendum and the next Fed meeting.
A fall in US hourly wages means that the Fed is likely to put up rates at their next meeting. It is precisely this that confirms Friday”s movements.
On Mondays I always look at a movement against that of Friday. Taking into account that between the AO indicator and the price a double bear divergence has formed, it”s worth expecting a correction to around 1.41 in 2-3 days,
Up to now, whilst the GBP/USD is trading above 1.4011, the risks of a return to 1.4565 are high. I”m sure that with the current candle formation, limit orders to purchase the pound will be set around 1.4060/80 and stop orders above 1.4305.
When there”s an approach towards 1.4460/1.4500, be ready for an inversion and weakening of the pound. This growth idea for GBP/USD will cancel out with a close of the weekly candle below 1.4011. If you”re buying pound at 1.4060-1.4080, it”d be better to put a stop within 60-70 points.
Why not take advantage of the improved version of the Trader”s Calculator.
