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Transcript of Video
I’m going to begin the day today on the Greater British Pound versus the US Dollar [GBPUSD]. I’m starting here on the Daily Chart and it’s not too hard to see that this currency pair has been in a downtrend for many months. We go all the way back into June and July of this year, where we started all the way up here at the top of the chart, into the 1.7200s. We made a dramatic fall all the way down here into the 1.5700 and 1.5600s, down at the bottom right-hand side of the chart.
Throughout the life of that trend, we’ve seen lower highs and lower lows, and that’s really the pattern of the trend that we need to pay attention to because that pattern has not changed. And until we start to see higher highs and higher lows, we have to assume that we’re still in the downtrend here for the GBPUSD, and that’s the direction we need to put most of our trading efforts; is in the direction of the trend.
It doesn’t mean occasionally, if you see shorter-term uptrends during an intraday time period or breakouts above short-term resistance, that you can’t take a buy, but most of our efforts need to be spent in the direction of the trend, which currently is a downtrend. Over the past several days, we’re going back all the way into November 14, 13 – the beginning of the 13 and 14. We can see that we have been in a period of congestion. You see the red box down at the bottom right-hand side of the chart.
So, several days just kind of bouncing around here, a couple of weeks, and finding resistance into the pink-shaded area, 1.5700 to 1.5725, 1.5730. That’s the top resistance of the area of congestion. Support into the little green-shaded area at the bottom of the red box, down into the 1.5630s, down towards 1.5600. So, we’ve been bouncing around in here for several days, going back to mid-November.
So, what we’re looking for are of course two things, either a breakout in the direction of the trend, which in this case, let me go ahead and zoom in one more time. A breakout in the direction of the trend would be a break of the bottom of that red box and that green-shaded area. That’s our first thing that we’re looking for. That would be a clue that the trend is continuing, and that would of course be a breakdown underneath 1.5600. The other thing we’re looking for to trade the direction of the trend would be rallies into resistance.
Now, over the past six days, we can see that the market has clearly found resistance at the pink-shaded area, but it’s been beating that up pretty well. So, be cautious about selling it there. Doesn’t mean you can’t, but be cautious about selling it there into 1.5700, 1.5730 because it has been beating that up pretty well and definitely a possibility of breaking through there. If it does, of course our clear next resistance zone here that we could see on the chart is the orange-shaded area, and that would be closer towards the 1.5800-level.
So, if you’re going to trade the direction of the trend, these are the three areas that you’re going to be paying attention to here for the GBPUSD, and I think probably being a little bit cautious at the pink zone because we’ve been there so many times and it’s likely any orders that were sitting in line in wait around 1.5700, 1.5730 have likely been satisfied on the sell side, so it wouldn’t be too difficult to see the breakout above the pink zone and a dramatic rise higher if it decides to go in that direction, especially given the fact that we have some significant news coming up in about 40 minutes or so from the recording of this video.
So, the other thing that you’ll be looking for today would be a potential breakout above 1.5730, and that would take it all the way back up towards the 1.5800, 1.5815-level, which is the orange-shaded area and also where the current downward-facing trend line sits. I think focusing your efforts in the direction of the trend is still the main focus, and I think the only reason I would change that attitude is if it breaks above the blue trend line and above the 1.5800-level, the orange-shaded area. Then we can start to look for higher highs and higher lows, which could be our next clue to a change in the trend.
If we see the breakdown today of 1.5600 and the continuation of the trend, then likely we’re looking for the targets all the way back down here to the yellow-shaded area, 1.5465, 1.5470. That is the yellow-shaded area down there. We’ve discovered that from the Trade Room several weeks ago as a new target if it breaks down outside of this congestion. I think that’s probably the best thing to do today; is wait for the push outside this congestion, so you have a better idea of what direction that this is going to go in after that significant news.
Now, of course, we’ve seen support at the bottom of the red box, the green-shaded area, so that’s something that may have been significant. If you decided to buy there over the past 24 hours, you’ve had an opportunity to buy into the green zone. If you did that, I think it’s time to protect profit as we approach the pink-shaded area and the top of our congestion that we see here for the GBPUSD.
Zoom it out a little bit. Let’s take it on back down to the 4-Hour Chart. There’s that same red box, the same range we’ve been discussing in the Trade Room. Again, you’ve had opportunities to sell into the pink zone. We’ve done that in the Trade Room this week. We’ve had opportunities to buy in the green zone. If you’ve been looking for countertrend trades, that’s been present over the past eight hours or so. You’ve seen it dip back down here. If you bought it there, protect profit. If you sold it in the pink zone, hopefully you protected profit as it touched into the green zone. As we see that impending non-foreign payroll news coming up in just short while from the recording of this video, I think it’s prudent to wait now for the breakout of our area of congestion, and then we’ll look for a more clear direction for the trend for the next few days here for the GBPUSD.
