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The British are Coming!


Jul.20.2013

Ladies, Forex Diva has picked her trade of the day, and guess what, it is the British Pound against the US dollar (GBP/USD). The pair has been spotted breaking some boundaries so it’s time for us to take action and take a closer look.

As always, the key to remaining a successful invest diva is analyzing the four points of the Forex Diva Diamond.

Forex 4-way analysis

Technical Stuff

As a Forex Diva tradition, let’s zoom into different time frames of the Pound-Dollar party room and check out how they have been dancing around.

Daily Candles

The daily chart is where the cool stuff is happening. For the 3rdtime since the previous sharp fall in May, the pair is getting close to the 50% Fibonacci retracement level.

[caption id="attachment_625" align="alignnone" width="500"]GBPUSD Technical analysis GBP/USD Daily Chart with Fibonacci Levels, August 21, 2012[/caption]

This can be pretty exciting for all the Fibo-loving divas. But will the 50% Fibonacci level hold? Let’s take advice from Mr. Ichimoku.

[caption id="attachment_626" align="alignnone" width="500"]GBP/USD technical analysis on daily chart GBP/USD Daily Chart with Ichimoku and Fibo, August 21, 2012[/caption]

As you can see in the chart, in the previous attempts, the pair was moving inside the Ichimoku cloud which usually signals no clear direction. But today, the pair broke above the upper band, as it approached the 50% level.

Let’s put the two together:

-When the candles break above the Ichimoku cloud, it can be a BUY signal, meaning the prices may go higher

- Therefore, chances are the 50% Fibonacci level will not hold this time, meaning we could expect a rally up to the next Fibonacci level at 1.59115.

What happens next? Let’s refer to the longer-term charts.

Weekly Candles

This week the pair has entered the wait-and-see zone of the Ichimoku cloud.

[caption id="attachment_627" align="alignnone" width="500"] GBP/USD Weekly Chart, August 21, 2012[/caption]

They just crossed above the lower band of the cloud. For a long term position, I would wait until the end of the week and see how deeply the pair moves up in the cloud. It could be temporary move, and the pair may move back down towards the key support in the 1.52 area (thick green line).

Monthly Candles

On a monthly basis, it seems the pair has been dancing inside a symmetrical triangle after the dramatic fall of 2008. The trend lines formed in 2009 and 2010 (A-C and B-D) and the pair has been trapped in between ever since. The pair has recently been dancing closer to the lower trend line, and even dared to touch it 3 months ago. Forex Diva suspects a break out below the lower line of the triangle in the coming months. You know what a break out of a symmetrical triangle means, right? Continuation!

[caption id="attachment_628" align="alignnone" width="500"]GBPUSD technical analysis of monthly chart GBP/USD Monthly Chart, August 2012[/caption]

So in the coming months, have your eyes wide open divas.

Fundamental Stuff

The fundamental mover behind the today’s rally is no longer a secret: Public Sector Net Borrowing. The markets were expecting a surplus this month which would be bullish for the pound, but the results were disappointing. Would this mean the pair will hold at the 50% Fibonacci level? Or should we listen to Mr. Ichimoku bullish indication? Send your thoughts below.

Sentimental Stuff

According to the Speculative Sentiment Index (SSI), 69% of traders are short the GBP/USD, meaning they are betting the pair will move down. But, the SSI is a contrarian indicator and is signaling more gains.

Putting them All Together- Capital Stuff

The three points of the Forex Diva Diamond is signaling a slight chance of more gains in the GBP/USD.

I would wait for the pair to prove to me its upward movement, that is breaking above the 50% Fibonacci level. Then I would aim to short the pair at 61.8% Fibonacci level for a long term position.

Since the signals aren’t strong enough, I wouldn’t set my leverage more than 2. Being risk-averse is the unique Forex Diva trait which prevents regretful greedy decisions.

Happy trading!

Forex DivaBy Kiana Danial

 

 

 

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