Will The £ Keep Taking a Pounding? Full GBP Analysis…

Will The £ Keep Taking a Pounding? Full GBP Analysis…

I’ve no idea of the answer to that question right now. Bank of England Governor Mervyn King recently warned in the event of  a Eurozone collapse we could see a rush of investors buying the British Pound taking it to unsustainable levels. The MPC is likely to expand it’s asset purchase program of £275 billion which I think GBP is already pricing in, however as the UK Government, believe it or not, remains ahead of the curve in it’s deficit reduction program we could see GBP become a safe haven, more likely now that the Swiss Franc is messed up with the Euro Peg.

From a technical view point there doesn’t seem to be any absolutely imminent trades to be taken, but there are some interesting things to watch out for.

GBP USD

Price currently right at the bottom of it’s range at major support. If the support does break I’d be concerned that it’s a fake-out and would want to wait for a failed re-test before entering short.  Alternatively if you are bullish, a long entry at this support would give a very clear picture of where to place stop losses. The pattern certainly looks like a Head and Shoulders pattern with 2 shoulders on the left and it’s quite feasable that we now begin to carve out a right shoulder, albeit likely to be more shallow than the previous one.

GBP JPY

I was fooled by this pair into buying the break out from this triangle which clearly failed. Next step is to wait for a clearer picture. It’s the stuff of dreams but a big spike (BOJ Intervention?) to those converging MA’s right at the bottom of the triangle would be a wonderful short entry.

GBP CAD

As you will know I have bullish visions for this pair but the chart isn’t confirming them…yet! Currently watching how price deals with this support on the 4 hourly time frame:

And that support combines with this trend line on the daily time frame, showing 2 annotated trade-able possibilities:

GBP CHF

This one is currently trading in a range on the 4 hourly chart but MACD does seem to be indicating further weakness. I’d be interesting in entering short with tight stop loss on another test of the top of the range or alternatively entering short on a back-test of the lower red line if this support were to fail:

EUR GBP

Finally we have a chart where the end result seems almost too obvious…. surely trading isn’t this easy? Make’s me nervous just looking at it.

Firstly a long term daily chart, definitely doesn’t look bullish does it, and those 2 red lines in the previous congestion zone appear like a very attractive target:

Moving to the shorter term and I’ve had my eye on this gap for ages. In fact, I closed a long position on the day of the 2011 high and had my eye on this gap even then…I did switch short soon after, if only I held on to it. It’s got to be an almost certainty that we’ll see this gap get filled in the near future:

Moving right out to the Quarterly chart and MACD is rolling over whilst the 20MA sits just 40 points above the current print.  Any retrace beyond that MA at 0.8380 prior to the daily gap fill would have me very interested in opening a long term swing short:

If I enter any of the trade possibilities detailed in this post I will leave a comment underneath the post or alternatively provide an updated analysis.

11 Comments
  • rhubarb
    Posted at 05:49h, 04 January

    Really interesting stuff, RS, especially EUR/GBP!

  • Weekly Swing Trading Round Up 7th January 2012
    Posted at 19:14h, 07 January

    […] crash!!)The final position is a GBP:USD short, analysis of which I’d recently discussed in this post but the credit for taking the position has to go to one of my forum contributors who put forward a […]

  • RS2OOO
    Posted at 21:11h, 09 January

    Following the above analysis, GBP:CHF broke out of the upside of the daily range annotated in the chart but broke down and had difficulty finding support at the top of the range. As price was rejected by the 4 hourly 20MA and simultaneously the 5 minute 200MA I entered short with tight stops. Initially entered as a day trade but as longer term indicators have started to role over I’ll keep this overnight with a view to turn it into a swing trade. Stop loss presently sits just above the 4 hourly MA but I’m going to carry out some further analysis tonight with a view to tightening that up as I’m not comfortable that the short term trend has changed until I start seeing further confirmation and lower highs.

  • RS2OOO
    Posted at 23:59h, 09 January

    GBP:CHF is already starting to look oversold so on the basis it will probably bounce form the hourly 200 MA, I’ve set a limit order to cover my short at that level. That would give me a profit I’m happy with (considering I only entered this afternoon), whilst also allowing me to wait for confirmation that this is more than a 1 day pull back from the Macro up trend.

  • RS2OOO
    Posted at 17:26h, 10 January

    GBP:CHF short closed at MA support for (hourly and 4 hourly combined) for + 60 pips. Initially half closed late last night as it was just a few pips from my initial target when I closed down for the night, then 2nd half closed at the same level today.

  • This Week's Trading Review With Charts
    Posted at 00:47h, 14 January

    […] still open and goes into the Weekend showing 180 pips profit:GBP CHFOriginal analysis can be found here.This trade didn’t really fit the usual criteria of being a swing trade but it’s a pair I […]

  • RS2OOO
    Posted at 22:01h, 18 January

    Re-shorted GBP:CHF today as further signs that a top might be in have started to become apparent.

    Looking for a 4 hourly candle close below the range shown in the above chart to really confirm the position (and a H+S top).

    A modest initial downside target of 1.4330 which is where the Weekly 20 MA resides and a low probability region of support if the selling pressure isn’t particularly strong.

    Ideally stop loss should be above 1.4662 but I don’t want to take that kind of loss on the trade so will just play it by ear for now and close the position if doubts start arising as to the trade’s viability.

  • RS2OOO
    Posted at 23:32h, 20 January

    I covered the GBP:CHF short today as I was uncertain whether the sell off would continue. Closed half for +50 pips, then another 25% at +60 pips leaving the stop loss at breakeven for the final 25% which eventually got stopped out. This gives an aggregate gain on the position of 40 pips.

    It was a tough trade to manage and had I not been checking the intraday chart and left it till end of day the position would now be showing a small loss overall, so on that basis alone I’m happy to have managed the position in the way I did and will wait for the next signal before entering further positions.

  • RS2OOO
    Posted at 19:12h, 26 January

    I’ve entered short EUR:GBP based on the above analysis. Well aware that my entry could be somewhat early, but it is based on the big picture and I reserve the right to be frightened out of this trade!

  • Weekly Swing Trading Round Up; 27th January 2012
    Posted at 02:00h, 28 January

    […] was amazed to log in that evening and see I’d been stopped out for a $58 loss.The EUR:USD and EUR:GBP shorts started off great and it was nice to wake up this morning to see a combined 115 pip profit […]

  • RS2OOO
    Posted at 21:37h, 30 January

    It’s not very professional, but I’ve chosen not to stick with my system and I’ve closed out the EUR:USD and EUR:GBP shorts.

    I’m just not happy with the charts right now, and there will be plenty of opportunity to enter short again if need be. Both trades are just constantly on my mind every time a new bit of Euro news comes out.

    I’d consider re-entering the EUR:USD short at 1.3175 ish if resistance is found at that level, otherwise, I’d short on a break of the hourly channel.

    EUR:USD closed for +31 points.

    EUR:GBP closed for +11 points.