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I’m going to get started today on the Greater British Pound versus the US Dollar [GBPUSD], but first I want to encourage you to join into the live, daily Trade Room at 10AM Eastern time today. I’m going to be introducing the new trading tool that you see on this chart today. We call it the ALR, which stands for advanced loss recovery. It’s really looking great, and I want to get a chance to share it with you today in the Trade Room.
I’ll walk you through how it works and how to apply it to basically any trade that we take using any strategy that we typically use in the Trade Room or any strategy that you might already be employing. So, please join into the Trade Room. I’ll be happy to share that with you. I might even give a few folks the opportunity to go into the trial with us and test out the indicator. You can follow me on Twitter at @YourDlyAnalysis. You could see that at the bottom right-hand side of the chart. That way, you’ll be up to date on anything that I’m doing and posting on there. Most of the time, I post the videos there, but if I get an opportunity I’ll post some information about the ALR also onto Twitter. So, you can go ahead and join me there also.
Let’s get started here on the GBPUSD. We’re on the Daily Chart. Of course we’ve been studying the longer-term uptrend here for quite some time for this currency pair. You go all the way back into June and July of 2013. You could see the three different ranges that we’ve identified here. We’ve been talking about these three ranges in the Trade Room for many weeks now. The range that the market developed here finally broke to the topside, went into the second range, finally broke to the topside. We’re into the third range. The question is: what’s going to happen now?
Are we going to break to the top and continue the uptrend, or are we going to see some reversal finally of this longer-term trend? We don’t know that for sure, but we can look for some clues to that as we go through out analysis today. Let’s go ahead and zoom it in here on the Daily Chart. And over the past several weeks, you could see the market holding inside this red box up here. It did find a range – top of the yellow-shaded area. Took a dip back down to the trend line. A little bit of a rally to the purple zone. Back to the blue trend line. Then a new high being made higher than the yellow-shaded area. Over the past nine days though, we have been kind of settled out into an area of congestion. A period, you might even call it, of indecision.
The market has not decided, for nine days now. Are we going to break to the topside and continue higher or are we going to finally turn around and start to go back down again? And we don’t know for sure, so what we’re looking for now is a breakout. We need a breakout of this period of congestion. Below the green zone to go lower. Above the pink zone to go higher.
Now, Forex Black Book of course is pointing to the bullish direction because that’s what the trend has been doing over the past several days. But with this period of indecision, the nine days that we’ve seen here where the market hasn’t gone up or down, it now has turned dark green. So, I think it’s anybody’s game here. I think, if it breaks to the topside of the box and the pink-shaded area, we see the bulls take back over and it starts going back higher, likely towards the 1.7000-level. However, if the bears decide to take control and it breaks under the green zone, over time we could even see that trend bar at the bottom turn red again.
Being that it’s dark green, I think it could go in either direction. If it was brighter green, I might have a little bit of a bias to the buy side. I still have a little bit of bias to the buy side being that it’s green, but dark green tells me that the shorter and longer-term trends are in disagreement. We can see that indecision up there at the top of the chart, and we just need to really wait for the breakout here for the GBPUSD.
Let’s go ahead and take all of that information that we’ve just harnessed from the Daily Chart and go down to the 4-Hour Chart. And as we get down to the 4-Hour Chart, not a lot changes about that, but the difference is, here on the 4-Hour Chart, we actually saw an attempt to breakout above the top pink-shaded area. We saw, yesterday, a four-hour candle open and close. One little single four-hour candle open and code above the pink zone.
What’s interesting, and we talked about this in the Trade Room yesterday, is that it didn’t open and close on the Daily Chart. It was just a single little spike above it, and then returned right back below it. So, we did not get the open and close outside the range on the Daily Chart even though we did here on the 4-Hour, which ended up being a false breakout. Over the past nine days, the bank flow levels also helping us show that there is resistance. There is selling pressure right now for this currency pair. There’s an accumulation of sell orders just above the market keeping it from going higher at this current point.
So, that being said, we really need to see a breakout of this on the Daily Chart to give us confidence that it’s going to be a real breakout and not a false breakout. So let’s go ahead and outline this. The pink-shaded area is our current resistance of course, and we would expect that as long as it stays within or under that pink-shaded area, it doesn’t have the daily open and close outside, that we might be looking for it to go back down. So, let’s go ahead and put an arrow there. Resistance here. Staying within or under there, we go back down.
Support would be, of course, down here in the green-shaded area. We’ve seen that over the past nine days. The breakout, of course, will be, and like I said, it’ll give more confidence on the Daily Chart. If we get a breakout above 1.6830 on the Daily Chart, then we look for the continuation higher, 1.6900 or even towards 1.7000. And of course it’s going to have to take a break through the bank flow levels also. The bank flow levels capping the current market.
If the bank flow levels and the sellers went out, we’ll look for the breakout underneath the green zone. We’ll call that 1.6780. And then, beyond there, we look for it to go back down towards this yellow-shaded area. Now, I’ve gone ahead and applied a trade here to the GBPUSD here. This is a demo account of course, but I wanted to show you how the ALR works later on in the Trade Room. Right now I have a sell order. I’ve actually taken a sell, looking for reversal. Right here, right around. Let’s see. The sell price is right around the 1.6811. Just underneath the pink-shaded area. And with that, I’m expecting a turn back to the green zone and a turn all the way back down to the yellow-shaded area. So, that would be the expectation for the trade.
If it doesn’t do that and starts going back up, that’s when the ALR indicator – the advanced loss recovery tool that I spoke about a few moments ago – will kick in and we’ll look for a way to work our way out of a losing, potential losing trade, which hopefully will not end up being a losing trade if that ALR indicator works as expected. So, we’ll definitely talk about that a little bit more during the trade room later on today. So, what I’m looking for today is a breakout. Above the pink zone, we look for it to begin working its way higher. Below the green zone, we look for it to begin working its way lower for the GBPUSD today.
