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I’m going to get started today on the Greater British Pound versus the US Dollar [GBPUSD]. I’m going to start here on the Weekly Chart. I want to look back in time a little bit and take a look at some history of the levels that we’ve been in for the past few days here on the GBPUSD. First off, the blue box on the left-hand side of the chart. We see the blue-shaded area at the very bottom, holding support.
We’re going all the way back to the left-hand side of that blue box, back into 2012. We could see support back here into that blue-shaded area. Only when it broke underneath it did it continue the downtrend. So, support and congestion back here. Resistance was into the green-shaded area at the top of the box. So, that’s important for us to realize back here into 2012. Then we bring it over here into 2013. Right-hand side of that blue box. Still staying within the blue box, so you could see a similar area of support at the bottom of the blue-shaded area and resistance at the top, into the green-shaded area.
Now, you need to realize that this is a long period of time. This is the Weekly Chart, so we’re looking at two, two and a half months where the market found resistance and support between the blue and the green zone, back here in time, 2012 and 2013. The reason that that is significant and not too hard to figure out right now is that if you just drag that blue box over, that’s where we are right now. Where have we found support over the past two weeks? Last week and now the beginning of this week. The blue-shaded area at the very bottom, and this is something we’ve been talking about in the Trade Room since last week.
Now, guess where we are. We’re back into the green-shaded area at the very top. Now, this is the most significant reversal, retracement, pullback that we’ve seen for the GBPUSD for several months now, since we made the highest high all the way there at the top of the chart. So, this is the most significant pullback that we have actually seen since then, so very interesting here, but we’re following historical support and resistance pretty much to the T. We could see the blue-shaded area at the bottom support. We’re now into the green zone, so this becomes a difficult area.
Now, if you bought it in the blue zone, this is a great opportunity to begin protecting profit. If it’s going to go higher, we would expect it to breakout of this green zone. Something we looked at in the Trade Room yesterday, and I want to talk about a breakout here for just a moment. You look back here on the left-hand side of the chart. When did it breakout underneath the blue box, underneath support and go lower? When you see this little circle, you see one single candle get underneath it. Then it gave you increased confidence that you were looking for the downside.
Well, what about the upside? Well, let’s take that same circle and draw it up here like this, and we could see. When did you have confidence it was going to continue the uptrend? When it broke out above the green zone, above the blue box. You see a couple of weeks sitting on top of it as support and then it continued the uptrend. So, that’s what we’re going to look for this week and next week. If we’re going to see this, take a move back higher again. We would expect to see an open and close above that green-shaded area and above the blue box, just like we did over there on the left-hand side of the chart.
So, for the day today, what we’re looking for is likely resistance here into the green zone. We’re looking between – we’ll call it – 1.6200, 1.6275 or so. That’s that green-shaded area that you see there. I would suspect that there will be resistance here for the intraday today. If that changes and we see the breakout above the green zone, we’re likely looking for some further movement higher here for the GBPUSD.
Let’s take that information down to the Daily Chart. There it is. There’s the green-shaded area. There’s the historical congestion that we’ve seen just in most recent times here into the green zone. And of course there’s the blue trend line coming down from the top. So, I would suspect that if you’ve bought it at any point over the past several days, then this is your target. You’re looking to close, protect profit now as it challenges here into the mid to upper-1.6200s. You want to look to protect profit if you’ve been buying. If you haven’t been buying and you’re looking to buy it, I don’t think that this is the best opportunity to buy it. You want to actually wait for a dip back down. And at this point, for me, it would be a dip back down towards the purple-shaded area, which is where our last support is.
So, buyers, if you’re looking to buy it, there’s only really two reasons to buy this currency pair today. Number one would be a breakout above the green zone that we looked at from the larger compression, the Weekly Chart, and above that blue trend line. That might give you a clue that we’re looking for a continuation higher, or it dips back down. The other buying opportunity would be a dip back down to the purple zone. Otherwise, if you’re not looking for buying, if you’re thinking: “Well, this is a sell opportunity. We’re rallying into resistance in the direction of the downtrend,” then this is where you’re looking for resistance and reversal clues for this to go back down. Right here. Mid to upper-1.6200s.
As long as it stays within here, history has shown us that we could look for maybe a little bit of a dip back down again for the GBPUSD. So, this is a critical hinge point. I’ve used that term in the Trade Room quite often over the past few days. If it breaks above the green zone, it goes higher. If it stays within it, we’re likely looking for some pullback down again in the direction of the trend, and of course you could see the trend line coming down from the top.
One other thing I want to do here. Let’s take this historical fib off, so no Fibonacci on the chart right now. Let’s take Fibonacci from the highest high, down to our most recent low that we see here on the chart. That puts the .236 fib right at 1.6245. That is right there, just a few pips higher than we are right now, just at the top of the green-shaded area. So, there it is. There’s another reason for resistance here. It doesn’t mean that I would buy it right now. It means that I’m looking for this to be a target for any buys I’m already in or potential resistance and reversal.
Let’s take that information down to the 4-Hour Chart. Doesn’t really change it. We’ve seen historical Fibonacci coming into play here, into that green-shaded area. The .236 fib. If I zoom it out just a little bit, let’s take another fib. Let’s take Fibonacci from this high right here, down to the most recent low. In doing that, we find that the 50% retracement level of that last down leg right here. This leg right here. 50% sitting right here, just about where that same .236 fib is, right around the 1.6235, 1.6245-level at the top of the green zone.
So, once again, if you are in a buy, then this is your profit target. If you’re looking to buy it, I would hesitate to buy it right now because we’re into resistance. I say this every day in my Trade Room. Buy low, sell high. If you’re at a high point, resistance, you’re not really looking to buy it. You want it to dip down. You want it to find support before you buy it. Back down to the purple zone would be ideal. Maybe just hesitating here in the green zone. We’ve seen a lot of congestion here in the green zone over the past few days, so maybe some hesitation here in the green-shaded area, but at least at this point, I think it would probably at least have to go back down to the bottom of the green-shaded area before I would even think about buying it again.
Right now it’s at 1.6225 or so. The bottom of that green zone. 1.6185. So, it has to go down before it goes back up. If I’m looking to buy it, more likely at the top of the green-shaded area today I’m looking for resistance and potential reversal to go back down in the direction of the previous long-term downtrend for the GBPUSD today.