The take away for this morning’s mini collapse GBP

by | September 11th, 2018, 10:37:02 | Education | 5 comments

An opportunity to gauge the relative strength of a currency

In every (mini) crash, there’s a lesson to take away. GBP happenings past hour: dropped from 1.3070 to 1.2989 in minutes.
What triggered it is less important, fact is we ran into a slew of short term stops, people being long GBP on a better Brexit outlook and this morning’s data and positive risk environment but at the same time leaving close stops as headlines can turn things around very fast.
Whether it were algo’s or trading desks needing to exec stops all over the place will be left in the middle.

What happened this morning can be seen as traumatising, especially if one has an opposite position to the move, sorry of it was the case for any of you.
But these are good moves to gauge the underlying strength/weakness of any currency to look at it from the opportunity side, since that’s what we do and still want out next trade on the books.
It’s probably going to take some time, a few hours, to absorb the stops, calling clients, explain and pick up new orders, but once done, the levels  will come back into play and the currency will show its  real face again.  From now respect the levels again and watch it we’re sliding slowly back down or find support typically around 2/3 to 3/4 of the initial dump or  jump.

That’s where either people getting stopped towards the lows want to get back into it or natural buyers having missed the drop will show their interest. If we hold, there’s case for the currency to regain the lost ground, If these levels are seen and we hang around there, it means there’s more supply and the probability of revisiting the lows increases.
I’m showing the cable in the post picture but one can do the exercise on the crosses such as GBPJPY and GBPCHF.
Stay safe and happy hunting
K-man
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5 Comments

  1. Vega
    Vega on September 11, 2018 at 10:43 am

    A very sound reminder
    Thanks ?

  2. Ryan Littlestone
    Ryan Littlestone on September 11, 2018 at 10:50 am

    Excellent summary Kman.
    I’ve gone long cable at 1.3030 to see if the rally is going to remain in place. What’s my thinking? Take out the spike lower and 1.3020/25 was the main support, and still is in this phase. That suggests exactly what you’re saying, that the buyers are regrouping and coming back in after getting washed out. Does that mean we’re guaranteed to go up again? No but that’s why I’ve got a tight stop under 20 if I, and the other buyers are wrong.

      • Vega
        Vega on September 11, 2018 at 12:59 pm

        Hi Ryan,

        This is exactly the reason why I missed your presence when you left forexlive, your HONESTY….. Always admired that in you.

        Thanks for all the guidance.

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