News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
Oil - US Crude
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
More View more
Real Time News
  • Knowing how to accurately value a stock enables traders to identify and take advantage of opportunities in the stock market. Find out the difference between a stock's market and intrinsic value, and the importance of the two here: https://t.co/QszmdZFxlk https://t.co/paOy1oQmn3
  • US indices have a packed week ahead with earnings from the major technology names, US GDP data due and an FOMC rate decision. With so much on the docket the potential for volatility is heightened. Get your stock market forecast from @PeterHanksFX here: https://t.co/CH4WoStHvu
  • GDP (Gross Domestic Product) economic data is deemed highly significant in the forex market. GDP figures are used as an indicator by fundamentalists to gauge the overall health and potential growth of a country. Learn use GDP data to your advantage here: https://t.co/Yl9vM7kO6a https://t.co/otJwnuR7qe
  • The Federal Reserve System (the Fed) was founded in 1913 by the United States Congress. The Fed’s actions and policies have a major impact on currency value, affecting many trades involving the US Dollar. Learn more about the Fed here: https://t.co/ADSC4sIHrP https://t.co/s4lZWdJoXV
  • The US Dollar Index traded higher last week, sustaining its broader uptrend. Conflicting technical signals urge caution, but the directional bias remains skewed to the upside. Get your weekly USD technical forecast from @FxWestwater here: https://t.co/jcwhcsUBEN https://t.co/tKrlrRZlZn
  • Technical analysis of charts aims to identify patterns and market trends by utilizing differing forms of technical chart types and other chart functions. Learn about the top three technical analysis tools here: https://t.co/KDjIjLdTSk https://t.co/MGy9OTXpUI
  • The Australian Dollar still remains vulnerable as it extends losses against its major counterparts. What is the road ahead for AUD/USD, AUD/JPY, AUD/NZD and AUD/CAD? Get your AUD technical forecast from @ddubrovskyFX here: https://t.co/ph20zFv4qS https://t.co/v4g9ATf4rr
  • The ISM manufacturing index plays an important role in forex trading, with ISM data influencing currency prices globally. Learn about the importance of the ISM manufacturing index here: https://t.co/Xr3xtoFpZy https://t.co/De69mTseZN
  • Take a closer look visually at the most influential global importers and exporters here: https://t.co/G58J1dg6y3 https://t.co/D7AeTM5OpH
  • EUR/USD tumbled last week on the day of the ECB’s latest policy announcement, and that weakness is set to continue this week as a flood of major Eurozone economic statistics is released. Get your weekly Euro forecast from @MartinSEssex here: https://t.co/9B4rJnzWuz https://t.co/ENF3xlkuyP
GBP/USD Technical Analysis: Two-Year Trend-Line Defining the Wedge

GBP/USD Technical Analysis: Two-Year Trend-Line Defining the Wedge

James Stanley, Senior Strategist

To receive James Stanley’s Analysis directly via email, please sign up here.

Talking Points:

  • GBP/USD Technical Strategy: Price action is building ia longer-term wedge formation as we near the Brexit referendum.
  • GBP/USD bounced off of the confluent support zone discussed last week after an abysmal NFP report created a rush of Dollar-weakness.
  • If you’re looking for trading ideas, check out our Trading Guides. And if you want something more short-term in nature, check out our SSI indicator.

In our last article, we looked at a recent decline in GBP/USD after a series of polls indicated a higher-than-expected majority favoring the vote to ‘leave’ the European Union. And for the past three months, we’ve been hearing warnings from politicians, Central Bankers and numerous CEO’s of the dire consequences should the ‘Brexit’ vote win-out. At that last Super Thursday batch of announcements out of the Bank of England, Governor Mark Carney went so far as to say that should voters decide to leave, the UK economy was likely looking at higher unemployment, higher inflation, slower growth and sharp declines in the value of the British Pound.

This is like a death spiral for Central Bankers because at that point, they have to choose which direction to mold policy: Should they look at higher rates in an attempt to offset a weaker GBP and rampant inflation while sacrificing employment goals; or should they look to lower rates in the effort of encouraging employment, even at the behest of inflation, growth and spot rates in GBP?

Of course, it’s difficult to determine what might actually happen should voters decide to leave the EU; and with many polls showing a majority to leave or, at the very least, showing that this may not be a clear-cut decision to stay, this is something that British voters are obviously debating consequenes as well. This has been getting priced-in to GBP/USD of recent as price action has dug into a longer-term symmetrical wedge pattern as we move nearer to the Brexit referendum.

GBP/USD Technical Analysis: Two-Year Trend-Line Defining the Wedge

Chart prepared by James Stanley

The symmetrical wedge pattern will often precede a breakout and with the Brexit referendum now just a little over two weeks away, the current price action structure makes sense. At issue is what traders should do about it?

There are a couple of options for approaching a symmetrical wedge: a) The trader can trade the short-term range, hoping that prices don’t breakout ahead of the referendum (against their position) or b) they can use current price action levels (the range) to devise a game plan for how to enter should/when the wedge finally breaks, whether its driven by the referendum or not.

On the chart below we take a shorter-term look at the current price action setup in GBP/USD. As you can see, support has been rather well defined while resistance has been a little more fleeting in nature, as indicated by the wider resistance zone than support. Because of this, traders would likely want to add a deeper buffer to resistance before looking to acquire long positions. At 1.4750 we have a psychological level along with a very recent price action inflection, and this could be the ‘knock-in’ level for traders to begin looking to buy a ‘higher low’ in GBP/USD. On the support side, traders could look to the zone spanning 1.4331 to 1.4371, which is the 76.4% Fibonacci retracement of the 2009-2014 major move in the pair.

GBP/USD Technical Analysis: Two-Year Trend-Line Defining the Wedge

Chart prepared by James Stanley

--- Written by James Stanley, Analyst for DailyFX.com

To receive James Stanley’s analysis directly via email, please SIGN UP HERE

Contact and follow James on Twitter: @JStanleyFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES