GBP USD medium term trading opportunity: We already reached our profit targets from last week’s GBP/JPY signal. This week I shared a number of new signals with our investing group members, among them a GBP USD medium term trading opportunity. With the UK GDP release coming up on Thursday, let’s take a look at the GBP/USD pair from fundamental, technical, and market sentiment points of view to round up the Invest Diva Diamond Analysis; IDDA.
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1- Technical Points: GBP USD Medium Term Trading Opportunity
Daily Time Frame: The GBP/USD pair has recently confirmed two out of three of our Ichimoku Secrets triggers on the daily chart. Last week we had the Tenkan and Kijun lines crossover. On Wednesday the pair confirmed below the daily cloud, after failing to break above the 1.3225 resistance level earlier in August.
Fun Fact: The US Dollar went defensive on a combination of a President Trump threat and weak US Data, however the GBP/USD pair managed to extend losses regardless. This means that the British Pound is weaker than the US dollar at this point, and the USD is the winner of the pair’s dance moves.
Monthly Timeframe: On the monthly chart, the GBP/USD pair has formed a decisive bearish engulfing so far during the month of August. However, tomorrow’s GDP data and the Jackson Hole Summit could create enough volatility to make a last minute twist in the pair’s direction before August is over. The pair remains below the monthly Ichimoku cloud while the future cloud is in the red territory.
2- Fundamental Points
The second point of the IDDA suggests looking at the economic and political developments that could impact the currency pair.
US Side: The US dollar is being pulled around from three sides. US politics, US data, and Jackson Hole Summit. US President Donald Trump isn’t making things easier, as he suggested a shutdown of the government was possible and threatened to terminate the North American Free Trade Agreement.
Trump warned late on Tuesday he might end the Nafta trade treaty with Mexico and Canada after three-way talks failed to bridge deep differences. He also said he may shut down the government if he does not get funding to build a wall on the US-Mexico border.
It was not the first time Trump has threatened to scrap Nafta. But it was the first time he made the threat since negotiations started.
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On the other end, the Jackson Hole Summit is right upon us. Central bank representatives and finance ministers from over 40 countries gather around (not in a hole) to discuss future monetary policy decisions and economic outlook. The theme of this year’s summit is “Fostering a Dynamic Global Economy”. Fed Chair Janet Yellen will be speaking about “Financial Stability” on Friday and is tentatively scheduled to deliver her speech at 4:00 pm GMT.
Also coming up is the US weekly jobs report on Thursday at 12:30 PM GMT.
Drama all around.
UK Side: The UK will release their GDP for Q2 on Thursday at 8:30 AM GMT. While it is expected to remain unchanged at 1.7% on a YoY basis, we could see some volatility before and after the data release which could create a GBP USD medium term trading opportunity.
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With that, we are expecting a ton of volatility in the GBP crosses, and therefore planning ahead for a long-term investment, instead of a short-term trade which could be very risky.
3- Market Sentiment
Market sentiment analysis is the 3rd point of the IDDA, taking a contrarian view to crowd sentiment. Retail trader data shows 54.8% of traders are net-long the GBP/USD pair. The number of traders net-long is 1.0% higher than yesterday and 6.3% higher from last week, while the number of traders net-short is 5.0% higher than yesterday and 3.1% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBPUSD prices may continue to fall. Positioning is less net-long than yesterday but more net-long from last week. The combination of current sentiment and recent changes gives us a further mixed GBP/USD short-term trading bias.
Let’s Sum it up
Disclaimer (1): As 4th point of the IDDA, you must calculate your risk tolerance before deciding on which trading strategy is suitable for your portfolio. We normally do not recommend trading without three or more confirmation of a specific direction from technical, fundamental and market sentiment points of view.
Disclaimer(2): Forex is one of the HIGHEST risk investing instruments there is. If you don’t have sufficient risk tolerance to trade forex, you can try investing other online securities.
Final thoughts: Based on our IDDA outlook, we could first see some up moves in the next two days towards the daily Ichimoku cloud amid the projected political and economic volatility. This would create a perfect sell opportunity. Then, based on the medium-term technical analysis, we could see a drop towards our key support levels.
For further insights on our strategy and where to set your sell limit order and profit taking levels based on your RISK TOLERANCE, join our investing group.
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Combining all points of the IDDA, here are Invest Diva’s calculations for important approximate levels to keep an eye on:
|Support Levels||Turning Point||Resistance Levels|