GBPUSD Weakening But For How Long?


The bias on the GBPUSD switched from Bullish to Bearish over the summer period. The long awaited break of 1.7000 was short lived with a rapid decline through the month of August and September to just over 1.6000. This is a fairly sharp turn around and a good example of how, despite the odds being in my favour for a bull trend continuation when I had entered, that hitting target is not guaranteed. My first position hit target but my compound failed to do the same when the Bears took control of the market.

As a reminder, a good trade is one based on you following exactly your reasoning and logic for entering a trade REGARDLESS of outcome. Losses are part and parcel of trading and which is why your risk should always be kept small. Mine is never more than 2%. The outcome of trades is purely random but if one understands how to read price action and limits trades taken to only those of a high-probability status, the chances of catching a profitable trend are greatly increased.

Below is the weekly chart and we can see that price had quite clearly been in a Bull trend since July 2013, where price had done a double bottom in close proximity to the half figure of 1.5000. The trend had been clean and linear with neat pullbacks, which is the structure of a trend that trend traders look for.

TECHNICAL ANALYSIS GBPUSD Weakening But For How Long Cable Weekly

Below is the monthly chart and the bigger picture shows a slightly different story. After the rapid decline of the GBP against the USD in 2008, this most recent year long trend had actually taken place in a prolonged period of consolidation. After every big trend, a period of market correction is expected before the next break out. When price broke the figure 1.7000 and the 2009 pivot high of 1.7043, trend traders were eyeing up a hugely profitable bull run with a potential high of 2.000 and even the 2007 high of 2.1000. But that was not to be as the Bears came in strong and have now forced trend traders to change their stance and look for potential shorting opportunities.

TECHNICAL ANALYSIS GBPUSD Weakening But For How Long Cable Monthly