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Stalking GBPUSD to Trade a Turn; Exotic FX a Stock Market Play

By , Sr. Technical Strategist
16 August 2013 20:00 GMT

Continue to track developments in the GBPUSD. Given the wild and confusing manner in which Cable trades at turns, it’s impossible to be specific on near term possibilities but continue to stalk this market into month end. Additional detail on GBPUSD is available in today’s DailyFX PLUS Webinar (archived under JamieTrading08162013).

USDJPY resistance is 99.20 and support is 95.35 then the 200 day average / June low. Operate appropriately at these levels. Trade between there is a ‘chop-fest’.

Today’s late break to highs for the month in USDMXN and USDZAR is promising in that we don’t have to worry about early month highs being in place. Risk is tightened to 12.70 USDMXN and 9.78 USDZAR (cost). Sit tight.

GBPUSD

Daily

Stalking_GBPUSD_to_Trade_a_Turn_Exotic_FX_a_Stock_Market_Play_body_gbpusd.png, Stalking GBPUSD to Trade a Turn; Exotic FX a Stock Market Play

Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

Interested in automated trading with Mirror Trader?

FOREXAnalysis: The GBPUSD blasted through its 200 day average (price closed .73% above its 200 day average…the highest above since January) and yesterday’s outside day and closed the day at the 88.6% retracement of the decline from 6/17. From a Fibonacci perspective, that is the final (although rarely cited) retracement. The level is also marked by the 52 week average and upward sloping line that extends off of the 7/25 and 8/8 highs. The channel is slightly higher, at about 1.5700 on Friday. The rally would consist of 2 equal legs from the July low at 1.5722, which is also the close of the high day in June. If price trades above the June high of 1.5750, then the 61.8% retracement of the Jan-March decline comes in at 1.5788 and the November 2012 low at 1.5826. Parallel channels have worked well in estimating support resistance at multiple degrees of trend in recent years.

FOREX Trading Strategy: Sitting tight…shorting here could work but you may need to feel some pain before it turns (and we don’t KNOW if it will turn anyway!). Given the wild, confusing manner in which Cable trades at turns, it’s impossible to be specific on near term possibilities.

GBPUSD

Weekly

Stalking_GBPUSD_to_Trade_a_Turn_Exotic_FX_a_Stock_Market_Play_body_gbpusd_1.png, Stalking GBPUSD to Trade a Turn; Exotic FX a Stock Market Play

Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

Interested in automated trading with Mirror Trader?

USDJPY

Daily

Stalking_GBPUSD_to_Trade_a_Turn_Exotic_FX_a_Stock_Market_Play_body_usdjpy.png, Stalking GBPUSD to Trade a Turn; Exotic FX a Stock Market Play

Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

Interested in automated trading with Mirror Trader?

FOREXAnalysis: The USDJPY appears to have completed 5 waves up from last week’s low with Thursday morning’s spike higher on news. The implications from an impulsive rally are for price to find a higher low (above 95.80) before the next bull leg exceeds 98.64. 96.70/90 is estimated support. Exceeding 98.64 opens up the NFP hourly close at 99.20, which is also the close of the high week for July. I’d expect that level to prove difficult to overcome and a strong reaction at that level would warrant bearish consideration against the August 2 high. Big picture supports are 95.35 and the 200 day average / June low.

FOREXTrading Strategy: In summary, resistance is 99.20 and support at 95.35 and then the 200 day average / June low. Operate appropriately at these levels. Trade between there is a ‘chop-fest’.

S&P 500

Daily

Stalking_GBPUSD_to_Trade_a_Turn_Exotic_FX_a_Stock_Market_Play_body_spx.png, Stalking GBPUSD to Trade a Turn; Exotic FX a Stock Market Play

Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

Solid lines on the chart indicate large volume days (largest volume in 20 days). Dashed lines indicate large volume hours (largest volume in 120 hours). The dotted line is just a prior high. The next chart shows high volume days on the S&P future in red with volume days in the 90th – 99th percentile over the last 20 days in magenta. Large volume areas tend to act as support/resistance in the future. When these levels are broken, they can indicate important changes in trend.

The underside of a multi-month trendline held as resistance and the S&P 500 rolled over this week. Following Thursday’s selloff, the market has churned around the 5/22 close. Is this the beginning of a bigger turn? It is impossible to know but separation from 1690 (large volume day from 7/31) is a good start.

S&P 500 Future (September)

Daily

Stalking_GBPUSD_to_Trade_a_Turn_Exotic_FX_a_Stock_Market_Play_body_es.png, Stalking GBPUSD to Trade a Turn; Exotic FX a Stock Market Play

Chart Prepared by Jamie Saettele, CMT using

USDMXN & USDZAR

Daily

Stalking_GBPUSD_to_Trade_a_Turn_Exotic_FX_a_Stock_Market_Play_body_usdmxn.png, Stalking GBPUSD to Trade a Turn; Exotic FX a Stock Market Play

Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

Interested in automated trading with Mirror Trader?

FOREX Trading Strategy: FXTW has followed USDMXN and USDZAR in recent weeks as a way to play a decline is the US equity market. Today’s late break to highs for the month in both rates is promising in that we don’t have to worry about early month highs being in place. Risk is tightened to 12.70 USDMXN and 9.78 USDZAR (cost). Sit tight.

Gold

Daily

Stalking_GBPUSD_to_Trade_a_Turn_Exotic_FX_a_Stock_Market_Play_body_gold.png, Stalking GBPUSD to Trade a Turn; Exotic FX a Stock Market Play

Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

Interested in automated trading with Mirror Trader?

Commodity Analysis: Gold broke through the July high and has entered a zone of consolidation that took place in mid-June. The consolidation stretches from 1365 to 1395. The top of the zone is defined by a confluence of trendlines and the ‘meridian line’ that we have followed for years. Remember, that line originates from the 2011 (record high) and February 2012 highs. The line then crossed through lows in late August 2012 and the highs in May 2013.

Commodity Trading Strategy: 1395-1420 (June high) is a level where one should expect a response from bears.

--- Written by Jamie Saettele, CMT, Senior Technical Strategist for DailyFX.com

To contact Jamie e-mail jsaettele@dailyfx.com. Follow him on Twitter @JamieSaettele

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Jamie is the author of Sentiment in the Forex Market.

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16 August 2013 20:00 GMT