Want FULL ACCESS To
ROSS’ DAILY TRADE ROOM?
Simply Click The Get Started Button Right Now!
Transcript of Video
Click Here to receive an email alert when Ross posts a new daily video.
I’m going to get started today on the Greater British Pound versus the US Dollar [GBPUSD]. I’m starting all the way out here on the Weekly Chart. Get a longer-term perspective on this currency pair before we go down to some of the smaller time compressions. For the past year or so, we’re going all the way back down here to the bottom of this blue trend line.
Back into July of 2013, we started what has been a long-term uptrend. We started all the way down here, close to the 1.4800-level. Then we started the rise over the past year and it pushed all the way back up here to the top of the chart into the upper-1.7100s, coming very close to 1.7200. Now, over the past several weeks, about two months, we’ve been in a little bit of a downtrend move as it’s been retracing or falling back against this previous uptrend.
So, what we’re looking for are two things. Further clues of a downtrend that may be taking hold. You know, uptrends sometimes change into downtrends, and so we’re looking for clues to that continuation lower, or we’re looking for clues to support where the downtrend might come to an end and start going back up in the direction of the previous uptrend. So, two things to look for: support or a continuation of the downtrend.
If we follow this back in time just a little bit here on the Weekly Chart, we could see this blue-shaded area. Kind of hard to see it small, but you follow it back in time. The blue zone. You see some resistance back here, all the way back into August of 2011 on the left-hand side of the chart. The pink-shaded area just underneath it, into the mid-1.6400s, we see support here. Back into March we see congestion and resistance back here into January of this year, end of December. We follow that pink zone back in time to the left-hand side. We could see that over in August of 2011. Resistance, and even into May of 2011, resistance.
Then we go back even further down and we look at the green-shaded area. Green-shaded area is quite significant. We see, quite a bit lower than the current market, down here into the mid to low-1.6200s, but we see support. We see major resistance back here, major area where the market found resistance and reversal, and then some congestion and resistance on the left-hand side of the chart. So, green zone quite significant here for the GBPUSD.
All right, now that we’ve seen that, let’s take all that information down to the Daily Chart, and we could see all those same areas. The green zone down here, the pink, and the blue zone. We could see the blue-shaded area is where the current market is, and it’s been struggling there for the past week or so as support, trying to see the breakout, looking for a breakout, bouncing off of it and going back up to this purple-shaded area.
Pink-shaded area of course is our next support. That would be where we’d be pushing to if it breaks through the blue zone, and beyond that the green zone. I’ve taken several different Fibonacci retracement measurements on this chart. One is from the lowest low to the highest high of the longer-term blue trend line. You can’t even see where that fib starts down here at the bottom left, but it’s at the bottom of that blue trend line. Taking Fibonacci like that, interesting enough, puts the .382 Fibonacci retracement level of the longer-term range. Again, going back to the Weekly Chart, the longer range coming from July of 2013, Fibonacci puts the .382 at 1.6282. That’s the top of the green zone.
So, very interesting there, all the way down into where these historical support and resistance are. I’ve also taken Fibonacci from this low here in the green zone. There’s a black X right here, back into February, to the highest high. Doing that, taking Fibonacci from there to the highest high puts the .786 Fibonacci retracement level at 1.6450. That’s the pink-shaded area that we see right here. So, that would be another fib to shoot for. And then I’ve also taken Fibonacci from this low right here in the middle of the chart, right into May 30th. There’s a black X there into the purple-shaded area, to the highest high.
I did that because we’re looking for Fibonacci extension levels of that leg of the uptrend. Fibonacci extension of that leg of the uptrend puts the 1.27 right inside the blue-shaded area, right at 1.6557. That’s right at the blue zone. That’s where we’ve been struggling with support. The next fib extension level beyond that is the 1.618, and that sits all the way down here between the pink and the green zone, into 1.6384.
All right, so now we’ve identified reasons for support on the way back down. What is the current trend? The current trend of course is a downtrend. Lower highs and lower lows. Let’s zoom it in a little bit here on the Daily Chart. We’ve been studying this in the Trade Room for the past two weeks. The pattern of the trend. First off, we broke underneath the bullish trend lines. There’s several different incarnations of bullish trend lines. Red, green, black and blue. Broke below those. Broke underneath the 100-day moving average, giving us a clue to further movement down.
We see lower highs and lower lows. We’ve studied the pattern of the trend. The pattern of the trend has been a little bit of a retracement and a fall, retracement, fall, and I’ve had those circled here. Retracement. Fall. Two. Three. And guess what. It’s done it now the fourth time. Retracement back to the purple-shaded area right here, and we’ve now seen the fall off of that purple-shaded area as we’ve been discussing and expecting in the Trade Room for the past two weeks. So, that should not be a surprise for you. Anybody that sold it into the 1.6600 or so level, that should’ve been your first clue that it tested that blue trend line, purple-shaded area. If you took a sell, sitting with quite a bit of profit now as it now challenges back underneath the 1.6640-level, trying to push under the blue zone.
How will we know it’s a true breakout? I define this every day in my Trade Room. Open and close underneath the blue zone is the breakout we’re looking for, for it to go lower. This is not a breakout. This is an attempt to breakout. This is not a breakout. We’re looking for a full close, open and close underneath that blue-shaded area before we’re confident in the breakout. Then we look for it to go lower to the next support.
Forex Black Book trend bar is red. All of that pushing bearish. There’s nothing. There are no clues that are telling us that this is going to turn around and go back up yet technically. So, all of that to me still pointing to the bear side. That’s the direction I’m concentrating in. I’ve been trading for the past few weeks into the sell side. Been taking profit all the way down, looking for new opportunities on rallies to resistance, breaks of support for the day today. Even with the Forex Black Book, we’re looking for new red arrows.
Forex Black Book is the red bar at the very bottom of the chart. Down to the 4-Hour Chart, just so we get a little tighter view of this. There’s our last Forex Black Book signal. You see the red arrow here. It’s already fallen off of that red arrow. We could see that was at the top of this candle. We’ve already seen 50 to 60 pips of profit on that last bearish signal with the Forex Black Book.
I might even take this down a little bit. Let’s take the bottom of this blue zone. Let’s put it right about right there into this area where we could see historical support here on the 4-Hour Chart. What we need to see right now is a breakdown of 1.6540. Clear single-candle body breakdown of 1.6540. Then I expect we’re looking for the continuation lower as we look for it at least down to this pink-shaded area. We haven’t had bank flow levels in a couple days. We did have a bank holiday yesterday, but if we’re looking for a continuation lower, we’ll look for those bank flow levels to continue to signal that bearish movement and support I think at least right now for the intraday will be all the way down there into the mid to upper-1.6400. The pink-shaded area today for the GBPUSD.
