GBPUSD relief rally?

[Mercury]

Is the relief rally on?  

 



[donaldprice]

I think factors such as UK data this morning will have minimal significance, however tomorrow's non-farm payrolls could be a game changer, if we do have poor data again, then a relief rally will without doubt be in play. One thing that cannot be dismissed is that in relation to divergence, EUR-USD is changing to the upside, and so is EUR-GBP and cable.

[Mercury]

What time frame are you looking at divergence on , assume it is momentum divergence you are looking at?  I see Positive Momentum Divergence on GBPUSD alright but the reverse on EURGBP...  But EURUSD is in no mans land (no divergence is evident to me).  I'd like to see it make it above 11,200 to complete a retrace rally before seeking to short or alternatively see a drop away to fresh lows.  I expect the former rather than the latter but who knows...

[donaldprice]

All are on the 4 hourly charts. And yes positive divergence on cable and negative on eur-gbp. Today's US figures could offer some insight into how the currencies could perform tomorrow, however as you say the rally could be a nice short-term opportunity with the chance of joining the major trend.

[Mercury]

Agree  I have similar analysis with Pos Mom Div on the low plus an inverted V formation describing a small EW1-2.  A break above the top of the V resistance zone (circa 13,020) is a decent place to go Long with a 3-4-5 up to Wave A of an A-B-C retrace to come.  At this stage I would be looking for a relatively shallow retrace rally, maybe to the Fib 38%, but that is still a lot of points.  With a shift towards no USD rate rises and possible further policy stimulus by the Fed we could even make a full 50% Fib retrace but that's all in the future.. For now I am stalking a Long GPB but only to the end of the retrace then back to Shorts for a hard move down.

 



[Mercury]

So the rally didn't quite materialise and we didn't get a sufficient break of the resistance zone to enter a Long but it is still on, just at a slightly higher level.  EURGBP is also shaping up for a drop, which could coincide with a sharp rally in GBP.

 



[Ken]

Hi   

 

I think Shorting cable will be the trade of the year even it looks like maybe too late or too early.

 

Fundamentals:

UK rate cut and QE are high likely, US rate hike possibility in 6 months, there are huge uncertainty about UK economy and politics at least for a year, Brexit talks will be hard and painful (no bank passport rights or single market without free movement, no EUR clearing business in London for sure), all respected economists, investment banks and traders forecast year end cable around 1.20 (even some says 1.10), I think in this environment no one can dare to go Long on Cable for a day...

 

Technical:

I thinks Brexit clear out all elliot counts and general trading strategies. When we look at the first fibo from 1.48 and second fibo from 1.33, I don't think cable can pass 1.33 in this economic environment. When we take into account trend line coming from 1.35 together with second fibo 61.8% line, I think there is a very strong resistance at 1.31 on 4 hours chart. Also, we have a bearish triangle with trend line and bottom 1.28 line, which I think it will be broken down.

 

I am thinking to short and hold it all the way until 1.20. I will open total 500K short position and stop at -20K (4%)

My worst case scenario 1.35 and I will try to catch 1.32 average if there is a rally while opening positions at 1.30-31-32-33-34-35.

 

I need your expertise for timing. What do you think about timing, my plan and entry levels ?

 

I miss shorting the Crude opportunity and don't want to miss this one:)

Cheers!

 

[Ken]

Hi   

 

I think Shorting cable will be the trade of the year even it looks like maybe too late or too early.

 

Fundamentals:

UK rate cut and QE are high likely, US rate hike possibility in 6 months, there are huge uncertainty about UK economy and politics at least for a year, Brexit talks will be hard and painful (no bank passport rights or single market without free movement, no EUR clearing business in London for sure), all respected economists, investment banks and traders forecast year end cable around 1.20 (even some says 1.10), I think in this environment no one can dare to go Long on Cable for a day...

 

Technical:

I thinks Brexit clear out all elliot counts and general trading strategies. When we look at the first fibo from 1.48 and second fibo from 1.33, I don't think cable can pass 1.33 in this economic environment. When we take into account trend line coming from 1.35 together with second fibo 61.8% line, I think there is a very strong resistance at 1.31 on 4 hours chart. Also, we have a bearish triangle with trend line and bottom 1.28 line, which I think it will be broken down.

 

I am thinking to short and hold it all the way until 1.20. I will open total 500K short position and stop at -20K (4%)

My worst case scenario 1.35 and I will try to catch 1.32 average if there is a rally while opening positions at 1.30-31-32-33-34-35.

 

I need your expertise for timing. What do you think about timing, my plan and entry levels ?

 

I miss shorting the Crude opportunity and don't want to miss this one:)

Cheers!

 



[donaldprice]

Hy Ken, although it is very clear that Mark Carney, will contemplate initiating more QE, I am not yet convinced that he will cut interest rates, as this really would affect the profits of Banks in the City, at a time when Banks unfortunately are in or have been in structural decline and a weaker pound, athough good for exports, is not good for financial services 70%+ of our economy. The chances of a FED rate hike in America this year also seem very slim. However the pound will without doubt continue to fall, some even suggest parity to the $. However if you are going to a significant amount of money I would probably seek further advice from IG. In terms of entry levels, best right now wait for a significant retrace of the major bear trend since June 23rd and allow technical's to signal a good entry point.