Transcript of Video
From Forex Traders Daily, this is your daily analysis with Ross Mullins, live from Richmond, Virginia.
Hello everyone, this is today’s video analysis for January 8, 2018. I hope you had a great weekend and are ready to get started trading this week. Today we’re going to be taking a look at the Greater British Pound versus the US Dollar [GBPUSD]. And as always, most important to use appropriate risk management strategies in all trade setups.
Taking a look here at the daily timeframe, we could see that the market has been in an uptrend for quite some time. We go all the way back to the end of 2016, beginning of 2017, bottom left-hand corner of the chart. The market has been on the rise along the blue trend line. 100-period moving average basically paralleling that trend line as the market has been moving higher.
However, we have reached a significant resistance area up here at the very top of the chart. 1.3550, 1.3585, the orange zone at the very top of the chart. Let’s go ahead and zoom it in on that. You could see back here, where the black box is. You could see the market seven days finding resistance there at the orange-shaded area and eventually breaking through the yellow zone and reversing and making a significant pullback here for the GBPUSD.
Then came right back up where the green circle is. Market came up. A couple of days tagging here into the 1.3550-level again and pulling back and having some congestion down here into the mid to low-1.3300s. Now here we are again. The third period coming up here into this area, 1.3550, 1.3585. Finding resistance here once again for the past previous four or five days. Now here we are the sixth day coming up here towards the 1.3550-level as resistance.
The question of course is: are we going to eventually see resistance and reversal like we did the last two times or eventually are we going to see it break above the orange zone and go higher? We don’t know the answer to that yet, but we can watch for evidence and clues to it. Well, first thing we could do is think about risk-reward. Right now what’s the potential reward for the GBPUSD if you were going to buy it?
Well, it’s being capped. It’s being limited. In fact, if you were to buy it right now, there’s no chance of significant profit if it continues to hold 1.3550. So, you don’t really want to buy right now. Risk-reward tells you that alone is not a great idea unless it breaks above 1.3585. Then, if you’re not buying because risk-reward is not in your favor, what about selling? Well, that may be something that we watch for. Clues and evidence of resistance and reversal.
Selling gives you better risk-reward because your risk of course is that it breaks above the orange zone. Your potential reward, if you just look back here at the black box, is of course the 1.3440, 1.3480-level, the yellow-shaded area just underneath the market. So, if you’re going to go short, the yellow zone is your target. Your risk is above the orange-shaded area. If you’re going to go long, you really don’t have that great of risk versus reward unless, again, it breaks 1.3585. Then of course we’re looking for it back into the 1.3700-level, the blue-shaded area at the very top of the chart.
Let’s take it down to the four-hour timeframe. Again, I don’t think it’s going to change our mind about it, but we just see that resistance here into the orange-shaded area. Here’s something new as of note for this week. Of course our Forex Black Book has turned red. The trend bar down here at the bottom showing that slowdown of the uptrend. The uptrend has come to a slowdown period. Resistance into the orange-shaded area. So, the trend bar, the momentum indicator has also turned red, showing that slowdown in the uptrend.
We also have a red arrow showing potential that the four-hour momentum is shifting to go back down. So, that’s something of note. We want to pay attention to that as a clue that we may be looking for a slowdown of the uptrend and potential reversal for the GBPUSD. So, if you’re looking for a trade today, I don’t think that this is a great idea to go long here into the orange zone, but potential shorts into 1.3550, 1.3585 with your stop loss just above it to protect you in case the market continues to pressure higher for the GBPUSD this week.
From Forex Traders Daily, this has been your daily analysis with Ross. If you would like to get Ross’ analysis on all the currency pairs he’s watching and all the trades he takes today, join him in his live Trade Room by clicking on the link below. Please leave any comments you have about today’s video in the comment section below.