GBPUSD update: Germany and Italy are not the only drama producers these days as the British bring back Brexit. Theresa May had a meeting with her cabinet that was supposed to further define their stance against the European Union. The result? A white paper is expected this week with all the details. This type of uncertainty serves as the perfect potential catalyst for the coming resistance zone on the chart.
Prices Are Reality Not Brexit Drama
No matter what the media produces about the Brexit topic, it is the chart that will offer perspective of any value. Depending on the conclusion of that meeting, price can gap either way at tomorrow’s open. The key is evaluating price against our predetermined levels.
You can read an article about our recent analysis and levels here.
1.3312 to 1.3383 is the .618 resistance zone relative to the recent bearish structure. Within that there is the 1.3329 major .382 support that may have inverted and be more of a resistance as well. Based on how price behaves around these levels, we would be more inclined to look for shorts.
As long as price is below the 1.3563 resistance (.382 of recent bearish structure relative to the 1.4377 high), it is less likely to produce any significant bullish broader movement. The mid 1.3300’s and 1.3500’s present relevant high probability resistance zones to watch for reversal formations.
Signal Will Appear On Chart Not TV
The media will dramatize whatever comes out this week. Details of the white paper will give outlets plenty of material to produce full length feature films around. The best way to not be mislead is by turning off the TV and turning on your charts.
Any bearish pin bars, engulfing candles or inside bars offer more value than any drama. Particularly if they appear in the middle of the 1.3300 resistance zone. That is where we will be looking for a short idea, otherwise there is nothing else to do.
Swing Vs. Broad View
If the Bank Of England raises interest rates in August and November, that could be enough of a broad catalyst to build a longer term move higher. That is not the time horizon we are basing our strategies around. We are looking at the swing trade time horizon which is much shorter.
The levels that we determine and evaluate help us to capitalize on the perception that drives prices over the next couple of days or weeks. Anything further out increases risk dramatically because talk and perceptions change fast in these markets.
If this market proves that 1.3051 is the near term bottom by forming a higher low, then we will be looking to capitalize on short term longs. That scenario is possible with a weakening Dollar along with interest rate hikes and Brexit, but until the chart provides actionable evidence, we will not bet on it.
Let Price Tell The Story
Forex in particular is the realm of the economic intellectuals. They speak a language of reports and metrics that sound complex and intimidating, but often do not offer any actionable value. Just like the rest of the herd, they often have no idea how to time a market.
No matter what pair you are looking to trade, everything you need to know is available on your chart. The true fundamental forces that are acting on price represent themselves through order flow, not on your favorite blog or TV show.
Price action is the reflection of the true perception and feelings of the market crowd. Knowing how and where to anticipate crowd reactions is where the actionable value is. In this case, we have a resistance zone that is overlapping other important levels in the 1.3300s. That is where we anticipate the crowd to react in a bearish way. And if it doesn’t, then we do nothing as well Brexit or no Brexit.
Let the price and order flow be your guide. You do not need anything else if short term trading is within the scope of your effort. If a short signal appears this week, we will be sharing it with our registered followers.
Questions and comments welcome.