The GBPUSD range started on October 10th, 2016 after the pair reach an all-time low and was supported by the 1.21 level. With the Invest Diva group members, we’ve been enjoying some short-term range trading ideas ever-since. Now that Brexit talks are getting serious, I decided to take my focus away from our [BRAND NEW] PowerCourse and write an update on this naughty pair. Here is the IDDA approach to develop a GBPUSD range trading strategy.
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1- Fundamental Points
UK side
Brexit Stuff:
Theresa May triggered Article 50 of the TEU yesterday via a six-page letter.
She is hoping to engage is a respectful engagement with EU leaders, and she wants to “negotiate as one United Kingdom.” Which probably means the Scottish Independence referendum will not be taking place before this.
She wants to put citizens first, and wants both the UK and the EU to “aim to strike an early agreement about their rights.”
Theresa May stressed that it would be in the best interests of both the UK and the EU to “work together to minimise disruption and give as much certainty as possible” in order to “avoid any cliff-edge.”
She also threatened that if the UK leaves ” the European Union without an agreement the default position” the UK “would have to trade on World Trade Organisation terms.”
She went on to say “In security terms a failure to reach agreement would mean our cooperation in the fight against crime and terrorism would be weakened.”
Wowza!
Other Economic Stuff:
UK economy has been doing relatively well, despite the Brexit worries. Consumer price index and retail sales in particular were winners as they came out higher than expected last week.
A couple of weeks ago, voted to keep interest rates unchanged at 0.25%.
However, since there was ONE Monetary Policy Committee (MPC) member (Kristin Forbes) who surprised market players yesterday by voting for a 25-basis point interest rate hike, Mr. British Pound regained energy and GBPUSD range bounced up from the key support for the third time since October.
US side
Trump continues to tweet. Healthcare bill failed. Investigation going on about Trump – Russian connections. Fed raised interest rates as expected. US business cycle seems to continue in expansion mode.
You know. The usual.
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2- Technical Points
After it’s free fall below the daily Ichimoku cloud on Brexit aftermath, the GBPUSD range has continued for well over five months. The upper level of the range falls on the 23% Fibonacci retracement level at 1.2650. The lower level is the new all time low of 1.21.
The pivot point is set right in the middle of the flat Ichimoku cloud, at 1.2395. This is the level we have been using for our range trading strategy.
GBPUSD range – Daily Ichimoku Cloud – Fibonacci Levels
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3- Market Sentiment
At this point the GBPUSD range seems to be narrowing with the Ichimoku cloud also thinning out. So far the pair has formed a Triple Bottom chart pattern, with the neckline also at the 23% Fibonacci retracement level on the post-Brexit downtrend.
Since the Brexit storm seems to be calming down, this could very well be the calm before a trend-changing storm.
GBPUSD Range Trading Strategy
Disclaimer: Forex is one of the HIGHEST risk investing instruments there is. Calculate your risk tolerance (or join our free workshop) to take the necessary steps before adding GBPUSD to your portfolio. For further help, please visit our investing group.
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We are currently waiting at the pivot point to decide whether we could get in another round of short-term trade towards the 1.21 level. If the Ichimoku cloud holds, we’ll get in a BUY position, or continue holding our bullish positions from before. Here are Invest Diva’s calculations for important approximate levels for GBPUSD range to keep an eye on:
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 1.21 | 1.2395 | 1.3065 |
| 1.15 | 1.2650 | 1.3421 |
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