Will #GBPUSD trend lower this week?
In this video we break down the #forex pair and why we look to trade with the trend.
The trend of a forex pair will often determine the strength and weakness of a currency.
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Hi, and welcome to this Blueberry Markets video update with me, John Kibbler, Head Currency Analyst.
In this video, we will go through GBP/USD because the market is starting to give us a little bit of a trend on the daily timeframe to the downside. So, we’re looking for the price to continue lower going into this week.
Now, the GB Pound was quite high on our list for buying opportunities last week against those weaker currencies because the strength and weakness chart showed that the GB Pound was from an area of weakness and coming back with a bit of strength.
Now, you have to be careful with those weak currencies because that weakness can come back in at any moment, which is what we’ve seen with the GB Pound. But, the market has now formed a new daily downtrend.
So, when you’re looking at these charts and determining which currency is stronger than the other, it’s all down to trend. If you see a market that is creating higher highs, that means that the base currency, which is the GB Pound on this occasion, and the term currency, the US Dollar, is stronger than the US Dollar.
What you need to look for is the market’s uptrend; the base currency is stronger than the term. If the market is in a downtrend, then the base is the weaker currency, and the term is the stronger currency.
When I talk about strength and weakness in the videos, it is primarily due to a market trend.
With GBP/ USD, we can see, here, it formed a new low. So, the market has done that and formed a lower low. That means that the GB Pound is currently weaker than the US Dollar. I know that today, the price pushed to the upside. But in terms of trend, the GB Pound is weaker than the US Dollar.
When the market’s like that, we want to look for short opportunities. That doesn’t mean we go short immediately; we want to look for those key support and resistance levels first. What I want to look for is a potential area that the market could come into.
Now I quite like whole numbers on the GB Pound. If I pop in 1.25 here, it’s a good GB Pound level on an intraday basis. If I jump into an hourly timeframe, we can see that the price reacts to this level nicely on these lower timeframes.
What I’m looking for is for the GB Pound to rally up to 1.25. That’s where an area of interest could be.
When I’m looking at my charts, I’m looking at a couple of different things. The first one is the trend. What is the trend telling me? It is telling me the strength and weakness of a currency. The second is, I need daily closes to agree with me. What I mean by that is, if the GB Pound opens tomorrow, rallies, then hits that level; If the GB Pound then breaks through and gives us a bearish candlestick, then I’m interested in getting back on the GB Pound because the daily is agreeing with me for short.
So, that’s exactly what happened here. The market dropped, it came back, then it gave us a bearish candlestick with that rejection of this level here. That, to me, was a sign that the GB Pound could drop lower. It did; it pushed back lower. Where did it go to? Previous structure highs, there but now, it’s retesting that. It will pull back, and what I need to see is that nice daily close lower.
Once we get that, it allows us to dive into those lower timeframes and look at our mid-term trend, which would be that four-hour timeframe, and we can see this nice downtrend there. The market did rally and gave us a false breakout; it broke to the downside. I’m looking for the price to move up to 1.25, and give us a reason to short.
So, if the market starts to pull away, then it’s not good enough. I want to see some rejection pattern whether it be a double-top head and shoulders pattern or a change in a cycle pattern. Once we get that, then the timeframe is agreeing with our sentiment, and we can start looking for those short opportunities on the GB Pound once again.
What I’m trying to say is when you look at the term of the trend, what is it telling you? The trend is merely suggesting that one currency is stronger than the other. That’s why the saying “the trend is your friend” is a popular saying in Forex Trading since the market will trend in a particular direction because of that currency strength and weakness. You always want to trade a stronger currency against the weaker one to put the odds in your favour.
So, take a look at the GB Pound. I like the idea of the price approaching that 1.25. But, always remember that the trend is your friend, and look for those trending markets.
Thanks for watching this video update, and I’ll speak to you in the next one.
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