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GBP/USD Shrivels Towards Post Brexit Lows

GBP/USD Shrivels Towards Post Brexit Lows

2016-07-01 16:55:00
Jeremy Wagner, CEWA-M, Head of Education
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Talking Points

-GBP/USD retesting post Brexit lows of 1.3118

-A break below Monday’s low of 1.3118 may set off another round of selling

-Use the Grid Sight Indicator and Sentiment to pin point shifts in intraday momentum

After the monster sell off in GBP/USD in the wake of the Brexit vote, Cable has consolidated those losses and has found a trading range. We identified in Wednesday’s report how the June 27 low was a significant low. A break below that low of 1.3118 may spark more weakness in Sterling. However, with the technical patterns in equities, and namely DJIA, looking bullish, this suggests a risk rally and Monday’s low in GBP/USD may hold.

There are 2 tools that we can use to help give us a near term clue if Monday’s low of 1.3118 will hold.

  1. Sentiment as measured through Speculative Sentiment Index (SSI)
  2. Short term momentum measured through Grid Sight Index (GSI)
GBP/USD Shrivels Towards Post Brexit Lows

Sentiment

See how sentiment is moving if prices approach 1.3118. As we write, GBP/USD SSI prints +2.0. In Wednesday’s report, it was at +1.63. Prices are lower now than when Wednesday’s report was printed yet SSI is higher. This could be symptomatic of additional losses in GBP/USD as SSI grows more positive.

You may be wondering how that can be. Take a look at the chart above. For almost all of the past 12 months, traders have been net bullish (see the green shaded background). However, price did the opposite and fell from 1.56 in July 2015 to 1.33 today. SSI is a good contrarian tool.

Follow live trader position and learn more about SSI here.

Grid Sight

Using the Grid Sight Indicator (GSI), we can pinpoint shifts in intraday momentum to see clues if the support level is going to hold or break. I would encourage using the “m3” or “m5” setting for GSI. This indicator is best utilized when there is NOT a news event going on and when prices approach your support level.

For those that are unfamiliar, Grid Sight is a powerful big data indicator that can give you a look at the market by analyzing millions of historical prices in real time. By seeking out similar patterns, GSI helps you use that data to trade important levels coming up.

Therefore, if we follow the Grid Sight Indicator in conjunction with SSI, we can determine if this support level is going to hold give way.

One last thing, Monday July 4 is a US holiday. Therefore, volumes and market activity may be muted. Therefore, support and resistance levels are more likely to hold. I would be cautious of any break outs occurring on Monday. Tuesday…well that is a different story.

---Written by Jeremy Wagner, DailyFX Education

Having a method to time trade entries is important. Managing your risk may be even more important. Learn how the better performing traders manage their risk by reviewing our Traits of Successful Traders research.

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