GBPUSD is doing its best to unwind all the gains made in the later part of August
GBPUSD is doing its best to self implode and give back a big chunk of the near 900 pips it put on in August. We’re at a big decision point for cable, and just testing a strong technical support area.
The 50 fib of this move is right here at 1.3215 and the low just now is at 1.3221. 1.3225 is also a prior S&R point so the tech is fairly strong here.
The 50.0 fib is an important one for me as between that and the 38.2 is where traders start to ask questions of their positions, in this case the longs from down below. If it holds, it can have a strong effect with longs adding to positions and pushing the price away. If it breaks, the opposite is often the case and we see more longs getting out and the price falling further. The 61.8 fib is the final line in the sand.
We do have some decent support from 1.3200 down to 1.3150 so a break here might not bring a big move. If we go through the 61.8 fib and the 1.3100 big figure then we could a bigger unwind and it probably won’t be long before 1.30 got tested.
That’s all ifs, buts and maybes, so we just trade the levels as we see them. As I type, the bounce from 1.3220 has pushed back to 1.3245 so look for signs of resistance stepping down from 1.3260/70 to 1.3250. For me, the optimum place for shorts is into 1.3290/1.3300 with a stop above 1.3310. For longs, I’d lean on the 1.3215/20 area but again, with a very tight stop.
Part of the play today is Brexit, and we’re getting a run of headlines that is putting the negotiations back on the front pages (not that they were ever far from them). We’re also seeing the buck go hand in hand with US yields, in which 10’s have run up towards the 2.40% area again but is still facing some stiff resistance around 2.37/38%.