GBPUSD—waiting

The remainder of my long stopped out at breakeven and I haven't re-entered.

Opinion on this pair is all over the place with one analyst who is consistently biased towards being long in the GBPUSD confidently asserting a long position to another saying the break below 1.50 this morning targets 1.4765. Clearly, there are some conflicting signals. This is why I don't usually read other's opinions until I've studied the charts myself and made up my own mind.

I'm planning on watching it carefully as it approaches 1.5065/80 as it's the downtrend line of the most recent channel on the one-hour chart. Much will depend on momentum as the pair could also reach the top of the larger channel at 1.5179. Sellers will probably pile in at that point, especially if it begins to falter. A look at the weekly chart shows that the 20 EMA capped it the weeks of 4/16, 4/30 and last week. Today that EMA is at 1.5052 so it has poked its head above it but can it hold it there? My bias is to sell.

On the other hand, there's a seasonal tendency for the pound to gain during the period from June 28th to July 21st. The trend has been up recently on the daily chart with only yesterday showing a lower high and lower low from the day before. Momentum is holding up reasonably well on the hourly chart. The drop to the low of 1.4981 this morning lines up with what I suggested yesterday—that there could be a return to the 1.4950/80 area of tough resistance that the pair managed to get through. All these suggest a long position. But this isn't necessarily the place to jump in if you missed, as I did, the probe low this morning. First, it might dip lower again to test that 1.4980. Or, if cable gathers steam at 1.5179 then there's potential up to 1.5280, 1.5305/40 and then 1.5540/80.

Here's the hourly chart:













© Dianne Fecteau, 2010. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.

My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.