GBPUSD update: The recent sell off from the 1.3293 high is not a dramatic as it may seem. The 1.3329 level is a major support and price is gyrating just below, possibly setting up for a failed low formation. All of this back and forth stems from the drama and uncertainty surrounding the interest rate hike and Brexit concerns. Once again, the chart will offer the best guide when it comes to positioning for a high probability trade, nothing else.
Bank Of England: Take A Hike
A lot of dramatic talk from Mark Carney regarding a deal with the EU. “A financial stability EVENT”, “moving from the situation of an integrated market to a much less integrated system”? As they say in the U.K. rubbish!
Meanwhile, just a couple of weeks ago the Pound rallied slightly on news of one of their top economists voting toward a rate hike for August 2nd. So no one cares any more? My point is the same: The news and “expert” analysts are going to report anything in order to justify their salary. And the market will often react randomly as a result. Avoid this nonsense because price moves according what motivates order flow on a broader basis.
You can read my analysis about the rate hike vote reaction here.
This broader agenda that price tends to align with can be detected on your chart. That is why technical analysis provides so much value, especially over shorter time horizons.
What The Chart Says
Momentum is still bearish as indicated by the bearish trend line. There is also the 1.3312 to 1.3383 minor resistance level (.618 of recent bearish structure). Beyond that the 1.3563 level (.382 of bearish structure relative to the 1.4377 high) is also intact which hints at weaker price action in general.
The level to watch for is the 1.2979 reversal zone boundary. This is the bearish extreme and where a higher chance of a bullish reversal like a pin bar or engulfing candle can appear.
This level also coincides with the 1.3000 whole number psychological support. A push higher from this area can take price back to the low 1.3200’s which offers decent swing trade potential.
Waiting for levels can be challenging, especially when price shows signs of turning earlier than expected. Keep in mind the key to consistency in trading is waiting for when conditions are as advantageous as possible.
The focus should be probabilities. Charts help us reduce randomness and isolate the patterns that offer attractive reward relative to the associated risk. The tools that we use are effective at measuring these hard to quantify “loose” probabilities that most novice participants are completely oblivious to.
Patience is what aligns orders with the most favorable conditions. Losses will happen and moves will be missed, but over time, a positive outcome is more likely achieved. This is the philosophy behind best practices.
Questions and comments welcome.
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