Free Profitable Forex Newsletter
Hey! This is Philip with this week's trade idea of the Free Profitable Forex Newsletter! In addition, we'll briefly review the general developments in Fx lately.
Here we are at the end of a busy week in Fx, jam-packed with central bank meetings, that resulted in nothing more but noise and choppy price action.
As we expected in our weekly analysis, none of the meetings was a source of great volatility as no big decisions were taken by the central banks. The Fed cut rates only by 25bp (0.25%) as was the consensus forecast which disappointed USD bears, and probably some EURUSD bulls as well.
Not much has changed for the major pairs
Hence, the trend of gradual USD strength remains in place while safe-haven assets are also staying firm and waiting for the next opportunity to shine.
EURUSD is staying within the 1.0925 - 1.1100 range but can continue to drift lower as is the general trend for this pair. After breaking above 107.00, USDJPY seems to have entered a 107.00 - 109.00 trading range now. The commodity Dollars, AUD, NZD, and CAD, remain weak and look attractive for taking selling opportunities.
For Fx, the focus stays on US-China trade war and Brexit
Overall, for currencies, the focus remains on the US-China trade war and on Brexit, which are both essentially tied to the economy and global growth. The US-China trade war matters a lot for AUD, NZD, JPY, CHF, USD, CAD and is their primary driver, while Brexit is the main factor for European currencies, primarily GBP, but also EUR, and even CHF.
Neither Brexit nor the US-China trade war can see the light at the end of the tunnel yet. And with that, uncertainty remains high for the outcome of these events and the subsequent effects on the economy, central bank policy response, and ultimately, the impact on currency exchange rates.
Time To Sell GBPUSD? (Pending Tactical Trade)
With all of the above in mind, we are looking at the GBPUSD pair, which seems to have reached stretched levels on the upside and may be ripe for a correction lower.
GBPUSD overbought in the short-term
The pair reversed sharply at the 1.20 lows three weeks ago, and for the past ten days, it's trading inside of a rising channel. The uptrend took GBPUSD almost to 1.2600 (about 600 pips away from the 1.20 lows), but it also reached overbought levels as is shown by our advanced overbought/oversold indicator on the chart.
Now, considering the importance of the resistance here in the 1.2500 wider area, and the exhaustion of the uptrend, GBPUSD looks likely to embark on a correction lower next week.
GBP fundamentals/sentiment also not that bullish
If we also take a look at the fundamentals, they also support what the technicals are saying.
Essentially, there is no progress on Brexit. The situation remains deadlocked, although GBP rallied in hopes of avoiding a no-deal Brexit after the British Parliament ruled out this option by law. However, as we know, things are not that simple because the British Parliament doesn't accept the already offered exit deal either.
So, GBP has reached overbought levels on a fundamental/sentiment basis as well, because anything higher than 1.26 - 1.27 on GBPUSD means that tangible progress on Brexit is achieved. But that is not the case. Hence, the pair is likely to revert lower as no-deal Brexit risks remain high.
This is a potential trade of tactical nature. So, things can quickly change on impactful Brexit related news which could still take GBPUSD substantially higher or lower.
Despite the bearish engulfing pattern on the daily chart, it is recommended to wait for a breakout of the channel to the bearish side before entering short given the substantial binary Brexit risks. With that said, here are the specifics for this tactical trade idea:
- Look for a bearish breakout of the channel support trendline on intraday charts (currently it sits near 1.2470).
- A breakout - retest - continuation bearish price action here would be preferable, but not necessary of course
Stop loss:
- Look to place a tight stop slightly above the breakout point of the trendline;
- maybe even above 1.2520 to allow some more breathing room for the trade
Targets: The specified Fib levels on the charts in the wider 1.23 area can be used as targets.
- 1st: 1.2340 - 1.2365 confluence Fibonacci support
- 2nd: 1.2300 round number level and former resistance
- 3rd: 1.2267 50% Fibonacci support
Trade signals from the past week
- September 05, 2019 - Short EURUSD from 1.1040, 1st target reached at 1.0925 lows (September 12) = +115 pips profit
TOTAL: +115 pips in the past week
TOTAL: +1665 pips profit since October 1, 2018
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Any opinions, news, research, predictions, analyses, prices or other information contained in this newsletter is provided as general market commentary and does not constitute investment advice. FX Trading Revolution will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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