GBP Trading Strategy: Following the Path of Euro Dollar

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GBP Technical Analysis

The UK referendum is probably one of the most anticipated event to all GBP traders. On 23 June (Thursday), 2016 Britain will vote whether it wishes to remain part of the EU or leave, which has been referred to as a ‘Brexit.’ All the polls combined together point to a narrow win to the NO camp but the polls are likely to change as we near mind June.

We have been able to capitalize over GBPNZD and GBPJPY in April, we believe there is room for further GBP gains in the Forex market. The 2 currency pairs we have been monitoring are GBPUSD and EURGBP. We are less fond of EURGBP as we uncertain the Euro is due for corrective weakness but we will present our trading strategies for both currency pairs.

EURGBP Weekly Chart

Please click on the chart to enlarge:

EURGBP_Weekly_Chart_4_May_2016

We have noted EURGBP is painting the right-hand shoulder of a top Head-And-Shoulders (H&S) on the weekly chart where the 200 Moving Average (MA) is acting as the nearest resistance. Had this been a daily chart we wouldn’t have hesitated to initiate a short trade. The weekly chart demands for the weekly session to end before any action is taken. The risk is a spike towards 0.8005, which we must price-in in the protective stop loss order should we opt for the trade prior to the weekly close. We are also less keen on shorting the Euro as we are uncertain EUR gains have yet to end in the Forex market.

GBPUSD Weekly Chart

Please click on the chart to enlarge:

GBPUSD Weekly Chart 04/05/16

GBPUSD Weekly Chart 04/05/16

As opposed to EURGBP, GBPUSD has affirmed reversed H&S and was able to break above the neckline (1.4420). The recent dip provides a fairly comfortable entry to join the uptrend and does not require a weekly close. As you may note from the weekly chart GBPUSD may still retrace lower (towards 1.4420) before correcting higher. We are aware economic data coming out of the UK has been soft due to the upcoming UK referendum. Businesses slowed down their operations until more clarity is shed on UK status in the EU. The market is already aware of it, which why weak figures that were already released from the UK had little impact on the currency.

We prefer GBPUSD mainly due to the fact we suspect EURUSD gains may continue and EURGBP weekly chart requires a weekly close. What we need to determine is whether we wish to tolerate the potential drawdown in GBPUSD or wait for tomorrow’s session as we may enter GBPUSD until the end of the week.

GBPUSD Trade Alert Details

We have decided to opt for GBPUSD. Please note it is a weekly entry, it is the tightest stop we can use.

Please click on the chart to enlarge:

GBPUSD Weekly Chart II 04/05/16

GBPUSD Weekly Chart II 04/05/16

GBPUSD long at market price (1.4493)
Take profit: 1.5020
Protective stop: 1.4288
Risk Ratio (RR): 1 : 2.7 (approx.)
Estimated duration: 21 days

11/05/16 UPDATE: The Bank of England (BOE) are expected to discuss the risks of Britain exiting the EU in the upcoming referendum and the possible measures that will be taken if Britain does vote to exit (the Sunday Times suggested one of these measures is a rate cut). All GBP pairs and crosses are subject to extreme volatility.

It is possible a short-lived spike will be seen in EURGBP. If EURGBP does not spike higher and sold as a result of the BOE then we will settle for GBPUSD gains.

Please click on the chart to enlarge:

EURGBP Weekly Chart 11/05/16

EURGBP Weekly Chart 11/05/16

Entry order (sell limit): 0.7965
Take profit: 0.7670
Protective stop: 0.8090
Risk Ratio (RR): 1 : 2.3
Estimated duration: 21 days

(EURGBP entry order was cancelled as the pair was heavily sold without reached the entry order’s price).

18/05/16 UPDATE: A new poll was released showing a greater lead for the camp that wishes to remain in the EU. As a result moderate gains were seen across GBP pairs and crosses.

18/05/16 UPDATE II: It appears day traders are reluctant to accept GBPUSD gains as large number of stops begin to accumulate around 1.4600.  If more traders will continue layering their stops are this region it may only encourage stop hunting in the market.

18/05/16 UPDATE III: As we emailed earlier, stops are being hunted in GBPUSD.

Please click on the chart to enlarge:

GBPUSD Weekly Chart 18/05/16

GBPUSD Weekly Chart 18/05/16

GBPUSD is trading at 1.4585 at the time of this writing, we are closing 20% of the long trade at market price.

18/05/16 UPDATE IV: This is a fairly risky manoeuvre but we are nevertheless shifting the stop to the entry and liquidate another 20% of the long trade at market price. We are realizing another partial as shifting the stop at current levels is an unorthodox approach. GBPUSD is trading at 1.5614 at the time of this writing.

Please click on the chart to enlarge:

GBPUSD Weekly Chart II 18/05/16

GBPUSD Weekly Chart II 18/05/16

Many stops were triggered in GBPUSD last kick higher.

20/05/16 UPDATE: GBPUSD triggered the protective stop loss order at the entry, ending the trade with a profit due to the partials’ liquidation.

GBP Trading Strategy: Following the Path of Euro Dollar

As GBPUSD long trade is  closed this page can now be accessed by all traders. Open trades and relevant intraday strategies are restricted to members only. We have been providing trade alerts in the Forex market since May 2014.
GBP Trading Strategy: Following the Path of Euro Dollar

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GBP Trading Strategy: Following the Path of Euro Dollar

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GBP Trading Strategy: Following the Path of Euro Dollar