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Transcript of Video
I’m going to get started today on the Greater British Pound versus the US Dollar [GBPUSD]. Starting here on the Daily Chart, not too hard to see that this currency pair has been in a long-term downtrend. We started all the way back here in July of 2014, up close to the 1.7200-level, the end creating lower highs and lower lows, broke through the 100-day moving average here, the green line that you see here on the chart, and continued to pressure lower for a several-month period.
Now, over the past several weeks, we’re going back into mid-November. November 14, 15. Since then, we’ve been in a period of congestion or indecision. We really haven’t been going down in the direction of the downtrend. We haven’t reversed and started going back up yet. So, since the mid part of November, we’ve just been kind of bouncing around in this little, red box at the bottom of the chart.
The question is: which direction will the market break out of this red box? Break to the topside and go back up again or will it break to the bottom side and go back down again. That’s still a question that’s been unanswered because we haven’t really actually broken out of this box. We’ll zoom in on it here in a moment. First thing, the trend line. The long-term trend line that we see here. The blue trend line representing the lower highs and lower lows, where, over the past three of four days, have been challenging that trend line. Have not successfully broken it, but we’ve been challenging it and we are doing that once again today. So, I just wanted you to see that.
One last thing here on the Daily Chart, before we zoom in. I’m going to take this fib here off and we’re only going to have one Fibonacci retracement measurement. Let’s go from the highest high, down to the lowest low. So, that’s the only measurement we’re going to have on the chart. Highest high to lowest low puts the .236 well above the current market, into the 1.5930-level, just at the top of that orange-shaded area you could see.
So, if it starts to break out of the blue trend line, that becomes our first potential target. And then, beyond that, the .382 is actually up into the mid to upper-1.6100s. So, we’ll definitely have some expectation of much higher push if we breakout and change the pattern of the trend. Pattern of the trend is lower highs and lower lows, is a downtrend. For us to change that, we have to see higher highs and higher lows. So, we’ll definitely watch for that as we begin to zoom in.
Let’s go ahead and zoom in once here on the Daily Chart. And again, there’s the long trend. There is our trend line. We’re challenging that again today. I’m actually going to zoom in one more time. I want to take a look at that red box, down at the bottom right-hand side. We’ve seen, since mid-November, two times where we’ve attempted to break – serious attempts to break outside the red box. We see right here, where it pushed above 1.5730, closed above it on one day, opened the next day and got right back down inside the 1.5730 or lower area. The red box.
Then, over a period of time, we saw an attempt here. We closed underneath it, opened, and then got right back up above it. Here, today, we are attempting to breakout one more time above 1.5730. The question is: is this a real breakout? Are we going to actually see, finally, a singular candle body open and close. That’s what’s going to give us confidence about the breakout.
Now, a simple close above here, as we’ve seen here, or close below, as we saw here, wasn’t good enough. It was a false breakout. How do we protect ourselves from a false breakout? That’s what I’m trying to do here; is determine what is a false breakout. And we can see the open or the close outside. The open and return was a false breakout. So, how do we determine a real breakout? For me, that’s going to be a singular candle body open and close above the range. So, in fact, we can’t see that today. We’d have to wait for the end of tomorrow. Tomorrow’s candle to open. Tomorrow’s candle to close before we can confirm an actual breakout of this congestion or this range that we’ve been in.
So, it’s not going to happen today, but it definitely does provide us something to watch as the market begins to pressure back above 1.5730 here and the top of our range, especially as we begin to go back down to the 4-Hour Chart.
Let me get over here to the 4-Hour. As we get over here to the 4-Hour Chart, we could still see those same shaded areas – pink, green at the bottom, pink at the top. We could see the massive rally that we’ve seen over the past eight hours or so and the attempt to breakout above our red box. Is this going to be a real breakout? We don’t know yet, but again, I’ll go back to the singular candle body open and close. We don’t even see that here on the 4-Hour Chart yet, do we? It’s been just so far an attempt, a quick spike above it, above 1.5730, but no singular candle body open and close.
The last time we saw a singular candle body – let me zoom out on time – above here was over here, where it attempted all the way back up here to this orange-shaded area at the top. So, again, we need to look for a confirmation of the breakout. And that, for me, will be the singular candle body open and close above the pink zone. If it doesn’t do that, this merely comes in another false breakout attempt and we look for it to begin going back down again in the direction of the longer-term trend.
It is interesting that this week, the Forex Black Book trend bar has turned green. Could that be a foreshadowing of things to come? Maybe, but definitely want to see some more confirmation. We want to have confidence in our trading. We want to have clear evidence. We’re looking for evidence that points to a particular outcome. So far the evidence is that the bulls are trying to take back control. The next piece of evidence that we need is that they’re able to stay in control and keep it above this price level without that return back down.
It still could come back down, even with an open and close, but we want that clear evidence that it’s a clear breakout and not just simply a false breakout. So, today, an open and close above 1.5730, we’ll likely look for the continuation towards at least 1.5800 and the orange-shaded area that sits up here. And of course above that, we’ll look for the same thing above that last high you see over here on the left-hand side. We don’t have that yet, but that would be the next thing we look for, is that breakout above 1.5815 or so for the continuation higher. Not part of the scenario today.
If, by the end of day today, we get back down under the pink zone, under the blue trend line, again, we could look for just a return back in the direction of the trend. The next, of course, clear support level would be the green-shaded area. The bottom of our range. We’ll also look for a clear singular candle body breakout underneath the green zone if we’re looking for a return of the trend. Again, better on the Daily Chart, but maybe here on the 4-Hour Chart. We’ve already seen a false breakout once here on the 4-Hour Chart, so be cautious on that. Daily is better.
So, a daily candle open and close above or below is really going to give us higher confidence. A 4-hour, a little bit intraday confidence, and we could look for that opportunity for the day today as we look for it to rally back towards 1.5800 for the GBPUSD.
