On the left hand side, we can see from the weekly timeframe that bulls have failed twice to hold above 1.42. Bears seem to be in control now and from a COT perspective we can also see long positions being taken off while shorts are being added. We can expect price to retrace back to previous resistance that is now support before we can see some larger moves to the upside.
From a 4hr perspective we can see the completion of an inverted M formation and a retracement to the neckline of this structure, including a 61.8 retracement. All of this indicates a further move to the downside. Personally, I am waiting for further validation including a cut of moving averages to confirm the market environment but I feel confident that we will see a deeper pullback to 1.33.
I am fundamentally bullish on GBPUSD but short term I think it's very fair to see a sell off. Longer term, Cable is in a massive uptrend and 1.33 would be a great entry price to continue this trend with high R/R.
If you have any questions please comment below. - Nick
can you explain why are you fundamental bullish on gbp ?
IroncladFX
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@rafiktheboss, the most obvious reasons include the UK's vaccine prowess compared to the US and the yield differentials. We can also see a lot of optimism in businesses over the upbeat outlooks for the next 12 months. The BoE have expressed optimism too while also ruling out negative rates. Of course, there is still a lot of uncertainty around Brexit that is a negative for Sterling but we will have to see how these shape up. From a COT perspective we are seeing Long positions being taken off Sterling - I believe this is transitory.
UnknownUnicorn16807260
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@Ironclad_markets, got it, i see you know what you saying and i have another quastion, as a day trader to i need to look at the weekly chart too ?
IroncladFX
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@rafiktheboss, My approach is always to use the larger time frames to understand the direction and identify what market we are in. Whether that be trending, consolidating or retracing. The larger timeframes will make it easier to see the trends and generally you don't want to trade against the trend. As a day trader I would look at the weekly too. You want as much information as possible to be able to make the most informed decisions.
UnknownUnicorn16807260
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@Ironclad_markets, i started to gain profits when i started too look at the larger timeframes, you right. but still need to work on the fundamental to gain more confidence
IroncladFX
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@rafiktheboss, Studying fundamentals is a paradox and an ever changing environment with conflicting ideas. I would advice to keep it simple and focus on technical analysis first of all. Price is the most important indicator, all relevant information is already priced in and markets are forward looking - more so than we can comprehend. Price action is easier to study, by doing so you are interpreting all relevant fundamental data, albeit in a different format. Once you are more comfortable in reading charts, incorporate fundamentals into your analysis.
UnknownUnicorn16807260
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@Ironclad_markets, okay i like what you saying so will keep it simple