Want FULL ACCESS To
ROSS’ DAILY TRADE ROOM?
Simply Click The Get Started Button Right Now!
Transcript of Video
Click Here to receive an email alert when Ross posts a new daily video
I’m going to get started today on the Greater British Pound versus the US Dollar [GBPUSD]. I’m starting somewhere I don’t normally go to. This is the Monthly Chart for the GBPUSD. I have to go all the way out here because we’re looking back multiple years since the last time we were challenging into the highs that we’re seeing right now for the GBPUSD.
Of course over here on the right-hand side will be the current market price. We’ll look at that in a little bit more detail on the smaller compressions. What I want to do is go back in time and find out what that market did the last time we were in this price level. Well, the last time we were here was really back here into – we’re looking around August 2009. We see August 2009. The market was right here into this same price level, right around or just underneath the 1.7000-level.
The last time we were here we made a dramatic fall that pushed all the way back down here into the 1.4300s. So, quite a healthy fall as it found resistance into the 1.7000-level the last time we were here. The question is: are we going to do that again now or are we going to get above it? The last time we got above the 1.7000-level, we have to go all the way back here, over to – this is looking back in November and December of 2003. We got above 1.7000 and made a dramatic climb as it pushed. The first push pushing all the way up here into the 1.8600s, eventually moving, finding support in that same area, and then moving all the way up here above 2.0.
So, quite an interesting scenario we have going on right here for the GBPUSD. This 1.7000-level historically, even going back to the left-hand side of the chart. We’re looking back in 1997. We’re looking back here. ’97, ’98. Back here on the left-hand side of the chart. Lots of resistance there. Some dramatic falls for the GBPUSD. And really the only thing that we need to pay attention to is if it breaks above here, a dramatic turn higher is likely the scenario. So, history is interesting here for the GBPUSD.
Now let’s go ahead and take it down to the Daily Chart. And we can see, over the past several months, we have been moving back higher. Actually, going all the way back to July of 2013, this began a long-term uptrend that is now, once again, challenging historic highs. We’re going back into the 1.7000-level. So far, 1.7000 has been able to repel the buyers. The buyers have been unable to get a successful breakout above 1.7000. But if, at anytime, we do see that clear breakout, specifically here on the Daily Chart, above 1.7000, we’ll likely look for the continuation of the uptrend and could be a very dramatic continuation.
If it can’t do that, as we’ve seen back in history, if it can’t break the 1.7000-level, that barrier that sits there, then we could be looking for reversal once again here for the GBPUSD. Let’s go ahead and zoom it in now. Zoom it in here on the Daily Chart still. Here’s the past three days. The past three days have found resistance underneath 1.7000. We go back over here to the left-hand side, where we were at the beginning of May. We found resistance there the beginning of May. Moved all the way back down into the 1.6700-level. Here we are once again.
It’s my expectation that as long as it stays underneath this orange-shaded area and that 1.7000-level that there’s a probability, a pretty good probability that we’re looking for clues to resistance and reversal. That’s what we’re looking for right now. Resistance and reversal. And the only reason to expect a continuation is if we see an open and close, likely above 1.7000. Then we look for it to go higher.
Reversals from here take it back down to the green zone as support. You could see resistance here. That would help us identify support. At minimum, I would expect that we’ll fall back down to 1.6900 as a support. A little bit further down than that of course would be the pink-shaded area, where the blue trend line comes up from the bottom, and that’s closer to the 1.6800-level. So, the easy stuff to point out here of course is, like I mentioned, above 1.7000, we begin looking for a dramatic turn higher again. Staying underneath 1.7000, we’re looking for resistance and reversal. Reversal takes it back down here to the green zone.
So, what do you do with this today? I really don’t think this is the place where you want to buy it. I think we’re finding a lot of resistance under 1.7000. As long as it stays underneath there, I don’t think I’m buying this. If I was thinking about buying it, I’d want to see that dip all the way back down there to the green-shaded area to give me a lower risk, higher reward opportunity. The reward right now, the potential profit is very limited because we’re still holding underneath 1.7000. So, the risk is high. The reward is very small. If it goes all the way back down to the green zone, the reward becomes bigger; the risk becomes smaller.
Now, all that, of course, will change if we get that breakout above 1.7000. However, the risk/reward for selling this currency pair into the orange-shaded area is not bad at all. The risk is very small and the potential reward, again, is all the way back down to the green-shaded area. So, at least, at this point, we’ve taken a sell in the Trade Room. We entered a sell here on the GBPUSD right, just into the 1.6985-level, I believe it is. 1.8590-level. Taken a sell. We’ve applied the Advanced Loss Recovery (ALR) tool to it. If it does, indeed, continue to pressure higher and breaks out above the orange-shaded area, we’ll be taking into a hedge here on this account and we’ll likely look for it to continue to pressure higher.
I’ve seen lots of questions about the ALR and asking, “What happens if the market goes into a straight-out run and doesn’t return?” Well, that’s what this tool is built for. It’s built to take advantage of that when it does happen to help you work out of a losing trade. Here, on this currency pair, I’ve taken a sell. If it breaks out above the orange-shaded area, it’s going to take into a hedge buy and the target for that hedge buy, if I squeeze it in, is all the way up here, where the red line is, into the 1.7130-level.
So, if it does go in a straight-out run higher, we have a target up there to shoot for. It will close out the sell and close out the buy all at the same time. And with the parameters we’ve set, close it out with actually profit even though it goes against what our first trade is, which is currently a sell. If it goes straight down, then of course we have profit targets also to the bottom side to help us take advantage of that. So, no matter which way it goes at this point; of course we’d prefer it to go down, but not matter which way it goes at this point, we’ll likely look for profit to be made on the trade.
One last thing before we close out for the video today. 4-Hour Chart. We could see where our bank flow levels were. They finally came out yesterday. Pretty late yesterday, but they finally came out exactly where we thought they’d be, just at the topside of the orange-shaded area. So, again, orange-shaded area, major area for decision today. If you’re going to sell it, this is likely where you want to sell it. If you’re going to buy it, you want to wait for the breakout above the orange-shaded area, but be very cautious on that breakout. Yesterday’s bank flow levels – we don’t know where today’s bank flow levels will be – will help you confirm resistance, selling pressure, targeting back down towards the green-shaded area. I’m in a sell. I’m looking for it to go down here. If it breaks above it, of course we’ve applied the ALR here to help us work out of a losing position if it does break out to the topside here for the GBPUSD today.
