Best Thread BBmac's Gbpusd thread

[bbmac]

contrarian view

The whole market is currently short the dollar right now but I think that could be a big mistake. I know this is a completely contrarian view and that the outlook for the dollar is not good. However, I have 5 good questions and 5 good answers why I think the dollar is headed for a reversal and that this is the perfect time to go long.
1. What good is a strong Euro? I believe a strong Euro will do more damage to Europe than a weak dollar will hurt the U.S. Recently, our weak greenback has been beneficial in two different ways. First by boosting exports and discouraging imports which provides a shot in the arm for our weak economy; not good for the Euro. Second, it helps shrink our trade deposit in goods and services which in turn slows the endless flow of dollars abroad; not good for the Euro.

2. Is there a currency that can replace the dollar as the world’s reserve currency? To this I have to say… into what? Recently China suggested it would diversify away from the dollar to a likely candidate the Euro. However, the Euro doesn’t have enough liquidity to handle the demand. It is still an experimental currency that not one government can invest in with total faith. Also, with more than two-thirds of foreign reserves in dollars, it would most likely take a decade to replace the dollar as the world’s reserve currency.

3. Is there anyone a weak dollar helps in the long run? Even though many countries somewhat dislike Americans, they dislike a really weak dollar even more. Why? A weak dollar makes U.S. exports attractive and forces foreigners to patronize that which they despise. Their manufacturing industries suffer and their unemployment rises. So don’t expect foreign governments to fight a modestly stronger dollar or even encourage it when the reversal begins.

4. What about the stock market? The stock market loves a strong dollar because a weak dollar is NOT beneficial to the stock market. Historically, the average return of the S&P 500 – during times when the dollar was strong – was a gain of 86.6% which is over five times the average return of 16.4% when the dollar was weak.

5. When is the best time to reverse positions in a market? The best time to take a contrarian position in a market is when the most unlikely and unsophisticated are speculating. Give me a break… when corner store owners and housewives start trying to earn extra income by speculating in the Forex, something they know nothing about, we’re near a bottom. The smart money knows that and now you do to.

Yes, the dollar will get strong again; at least moderately. In the near term there will probably be more pressure to the downside. However, a turn is coming and when it does the change will come swiftly!

Source: Mark Carlson @ Forex Trading Signals | FOREX Signals Guide

 

[bbmac]

1hr regular divergence

The developing hidden divergence Re-entry (to next t/f trend after a pullback) set-up on 4hr discussed on post #76 has a regular divergence based 1hr set-up (that could still be developing yet) supporting it. Of course this is a counter 1hr tternd set-up and 4hr has made a L at current lows (below it's last HL in it's uptrend) off the HH so not optimum in respect of overall price action analysis. The 4hr hid div based set-up does however come at a HL on the Daily t/f into whose uptrend a 4hr hid div based re-entry set-up and @ whose potential rbs might be indicated.

Reg div based reversal set-ups can indicate a contra trend trading opportunity @ potential supp/res/sbr/rbs that is either a pullback or a xcomplete reversal. the first target of a reversal set-up should be potential sbr/rbs on the next higher t/f but price action trumps everything.

NFP etc later so anything can happen. strong reactions to fundamental data releases don't generally respect tech patterns, lol.

Currently clearly some support around 6720.


(1hr reversal C)

 

[bbmac]

market commentary

LONDON (Dow Jones)--The foreign-exchange market has fallen into the usual torpor preceding the release of U.S. non-farm payrolls data, leaving the dollar mixed in European trading Friday.
Sterling is still feeling the effects of the Bank of England's surprise decision Thursday to extend quantitative easing to GBP175 billion, and poor second-quarter results from the Royal Bank of Scotland Group PLC Friday also dented the pound.
Looking ahead to the 1230 GMT U.S. payrolls report for July, the Dow Jones Newswires forecast of a 275,000 drop is less than the market consensus of around 330,000 job losses. Barclays Capital favors the Dow Jones forecast and says given the recent rally in risky assets, a downside surprise would have a greater effect on risky currencies than an equivalent upside surprise.
Citigroup Inc. said Wednesday's U.S. ADP jobs survey, which showed a fall of 371,000, slightly undershot expectations and combined with Thursday's initial claims reading of an unexpected fall to 550,000 have increased the expectations for a smaller-than-forecast payrolls decline. Therefore, it would take a sharply smaller-than-consensus reading to move the market, the bank added.
With this in mind this week's rally in riskier assets and the dollar's decline will probably face increasing headwinds, the bank said.
So until the payrolls data are released the dollar looks like it will continue to tread water, retaining Thursday's gains but unable to break fresh ground.
UniCredit SpA sees risk of further profit-taking in the dollar's favor if Wall Street reacts negatively to payrolls as a given, but added that if its own slightly smaller-than-market consensus forecast of a 300,000 decline is correct, then it may just freeze any potential dollar recovery.
The bank said sterling should be approached with caution after the BOE's decision to extend quantitative easing, and only a much smaller payrolls fall might push the pound back toward the $1.69 area.
Around 1000 GMT, the pound was at $1.6737 from $1.6750 late in New York trade Thursday, according to EBS. The dollar is down at Y95.18 from Y95.40 and the euro is at $1.4357 from $1.4360.

-By Gary Stride, Dow Jones Newswires; 44 20 7842 9481; [email protected]

 

[bbmac]

Current 5min congestion channel

I'd be more interested in an upside bullish thrust candle b/o than a downside bearish thrust candle b/o because in respect of potential r:r there is probably more scope to the upside with potential support around 6700 and potential res around 6800 ??

I will judge it on it's merits if it happens/sets-up (NFP excepted) and if not already in a position.

G/L

 

[bbmac]

So NFP coming up, have you got one of these on your keyboard?

Hope it doesn't leave anyone like this;

lol
G/L

 

[bbmac]

NFP..own thoughts.

Seriously though, market forecasts buoyed by Adp report and y/day's fall in intitial claims are for a lessening in the rate of joblessness, consensus being around -330k from last month's -467k. So if this comes in above say -400k and un-emp rate goes above the current 9.5% gbpusd could see some intial strength on the immediate reaction, particularly if last month's is revised higher and manufacturing job losses are again growing.

Of course anything below -330k with a lower revision of last month's and a stable 9.5% un-emp rate might see gbpusd sell off continue, compounding the losses from the Boe reaction y/day.

Just some thoughts.

G/L

 

[bbmac]

Someone's thinking the same way, re post above

1113 GMT [Dow Jones] Position trimming continues ahead of nonfarm payrolls, with risk taken off in most majors in favor of the USD, notes BNP Paribas. Lower equities and the RBA's somewhat dovish statement have also contributed to the moves seen, which come against a market that seems to be gearing up for a positive NFP number, says the bank. This apparent contradiction suggests the market is probably longer of risk than it's comfortable with, which also suggests the potential for a sharp correction in the event of a disappointing payrolls print, says BNPP. (GST)

Contact us in London. +44-20-7842-9464
[email protected]

 

[bbmac]

1037 GMT [Dow Jones] Intraday divergence warnings in GBP/USD were vindicated Thursday, says Barclays Capital, with the spot racking up a 3 cent decline. The bank says topping risks are now increasing and a decline below the July 31 upside breakout level of 1.6580 would trigger a deeper fall to the larger trendline support from the March lows, which comes in at 1.63. Now at 1.6740 the bank says intraday resistance is at 1.6900. (GST)

This was an earlier comment in the newsfeed, and the screenshot below shows the regular (bearish) divergence based set-up in 4hr at those 7044 highs. There was also a regular sequential (bearish) divergence pattern in daily t/f .

G/L

( 4hr Reversal B)

 

[bbmac]

Nfp reaction

Strange initial gbpusd reaction to U.s NFP, as a better than forecast # saw £ appreciate on the kneejerk reaction, (was rising before the data released) then went the conventional reaction way by finding resistance in the prev 1hr sw lo=prev supp=potential sbr zone (circled) for a great 150pip sell off a 1min repeating oscillator extremes based reversal set-up shown below. Note on the 1min set-up how a whole reversal candle closed outside the 20bol (white) a great indicator of price's extreme deviation on that t/f. Price has found support @ Dly s1 calculated pivot deeper inside the prev 4hr/dly sw hi=prev res=potential rbs zone as I write this with another oscillator extremes repeating set-up on 1min for the long entry...nice

Un-emp rate actually fell to 9.4% and the headline # was -247k with a rise in av hrly earnings.

the 1min chart is here:

(1min Reversal Extreme and Reversal Extreme ii)

 

[bbmac]

How did the 5min congestion channel fare??

I'd be more interested in an upside bullish thrust candle b/o than a downside bearish thrust candle b/o because in respect of potential r:r there is probably more scope to the upside with potential support around 6700 and potential res around 6800 ??

I will judge it on it's merits if it happens/sets-up (NFP excepted) and if not already in a position.

G/L

There was no thrust candle close b/o of the top channel as the candle closed back inside the channel so no opportunity to go long there. The following 1min repeating hidden divergence based re-entry (to next t/f trend after a pullback) did howevere set-up as price pulled back to the potential rbs of the previous 5minsw hi zone for an entry into the then 5min uptrend with both 30min and 1hr macd signal lines pointing up to support the trade direction.

(1min Re-entry 1)

Have a good w/e.

 

[bbmac]

New week comm 10th Aug 09

Prior to the the start of the new week, price is in a downtrend now per overall price action-peak/valley analysis to the 1hr t/f, arguably to the 4hr t/f:

Last weeks run up to a 7044 saw price just enter the base of that previous swing hi/lo =prev res/supp=potential sbr zone on the Monthly chart (discussed in post #2) The 50% fib of the major 2.1162-1.3505 fall @ 1.7333 remains untouched, ansd it remains the next significant upside fib above 7044. The subsequent Boe Qe announcement/U.s NFP # aided extended fall from that 7044 hi has seen a bearish pinbar develop on the weekly t/f:

.


Price closed on friday having found some support in the previous swing hi=prev res=potential rbs zone co-existant on the 4hr and Daily t/f's and inbetween the 38.2% of 6031-7044 [6656] and the 38.2% of 5980-7044, [6638.] This zone extends down to 6643 on the 4hr t/f although down to 6425 on the Daily t/f and at that latter level there is the 38.2%of the 5797-7044 rise. There are 2 ascending potential support trend lines on the daily t/f that cut through the said zone.

Turning now to the 4hr chart and potential sbr on this t/f resides @ the prev sw lo=prev supp=potential sbr zone 6887-6907, with further potential support @ a previous swing hi=prev res=potential rbs zone on this t/f extending 6583-6550-possibly 6524. There is an ascending potential support trend line on this 4hr t/f that intersects this latter zone.

 

[bbmac]

1hr t/f update

The 1hr screenshot below is the updated current position (correct as of Friday's close) as I see it in respect of previous obvious near-term imbalances of supp/dem (swing hi's) and dem/supp (swing lo's) and unbreeched fibs/trend lines on this t/f.

The unbreeched fibs are drawn from 6471-7044 (only 76.4% of that move unbreeched) and 7044-6649, last weeks hi-lo.

It is these factors that may cause future support/resistance (swing points) and in particular the confluence of these factors with each other and those on t/f's above this one.
G/L

 

[bbmac]

Mthly t/f

I've posted it before but here again the Monthly previous swing hi/lo zone that is now potential sbr. price just touched the bottom of the zone @ a 7044 hi before the fall last week. The 50% fib of the major 2.1162-1.3505 fall @ 1.7333 remains intact and remains the next major upside fib above current 7044 high.

G/L

 

[globaljobber]

Scaling out

I'm just looking at methods of scaling out trades for this strategy. I know this is a scalping strategy, and Bbmac doesn't scale out because it has such a high win/loss ratio. However, I am thinking that for trades in the direction of trend, it might not be a bad idea to try to get some extra pips in.

The image shows my trades this morning (quite a good day!), where I tried some scaling out, and increased my earnings in the process. Main trend is down. Trade A was a single contract trade, as was E because against trend. However, trades B,C and D were made using two contracts each, as with trend. I scaled out at what I saw was a first target of around 10pips, or prev supp/res/rbs/sbr area, but then moved stop to entry and allowed second contract to go to what I judged was potentially second scale out area. Yellow arrows are scale out/close of trade positions. The B trade was effectively zero win, as one trade was winner, but stopped out on second for evens. But, trades C and D were really good wins as second contracts went on to increase pip win (with stop moved to entry to remove risk).

Don't know if anyone has anything to add to this. Just an idea to try to increase pips when with trend.

 

[bbmac]

great eg of pa invitation to go long

Price sells off in early trading to the previous 4hr swing lo=previous support=potential support zone shown on screenhot below...this previous obvious near-term imbalance of demand/supply (swing lo) is co-existant on the daily t/f thus adding to confluence.

Dropping down a t/f the 1hr chart and price forms 3 pinbars at points a, b, and c in a clear invitation to get long against the 4hr trend but at a strong potential support zone co-existant across the next 2 higher t/f's from the trigger..a hi-probability trading opportunity for pip gain based on just pa and supp/res if ever I saw one.

G/L

I am just adding here for the sake of clarity that my own original long trigger was based on a 1min t/f bullish divergence and band deviation based set-up @ 0637am gmt this morning and I am flat now...I am just making an example of a good pa and potential supp confluence that makes for a high probability trading opportunity. there were also 5min and 15min triggers.

 

[globaljobber]

Hi Bbmac,

But....Does the 30m show a potential Re-entry to down trend (5m also just made a Rev Extr ii.) But then again, the 5m now though shows potential up trend re-entry setup?

 

[bbmac]

Hi Bbmac,

But....Does the 30m show a potential Re-entry to down trend (5m also just made a Rev Extr ii.) But then again, the 5m now though shows potential up trend re-entry setup?

Hi Gerard for a re-entry set-up on 30min back into 1hr downtrend the set-up didn't come at an optimum LH/LH on both the set-up it developed on and the higher t/f into whose downtrend the re-entry after a pullback a 'with trend' entry was sought. Ie on the 30min t/f it came @ a H following an effective HL...I'm not sayiong it wasn't a good set-up just that in respect of target the HL is a potential danger signal to the downtrend, so unless price follows through on the 30min with good bearish candles there may not be a 'with down trend' follow thru from that set-up.

In respect of the 5min Re-entry into the 30min uptrend @ potential rbs of the prev 1hr sw hi zone , well yeh 30min macd was crossed up and 1hr (and 4hr pointing up) so that's ok , just not much of a 1hr uptrend so again careful on potential target judging it on subsequent price action. PS: re your 5min pic you've really got to measure hidden div from the last obvious price swing;

@ the prev 1hr sw hi=prev res=pot rbs

G/L

 

[globaljobber]

Hi Bbmac,

That's just what I traded. Sat and waited for it. Not best 30 up trend, but all else looked ok. Although of course, only 7 pips in it as got in a little too late and out too early! Wanted to be a bit sure that Rev C was going to work, and out because seemed to be a bit of a lack-lustre day today, with little energy.

 

[bbmac]

Hi Bbmac,

That's just what I traded. Sat and waited for it. Not best 30 up trend, but all else looked ok. Although of course, only 7 pips in it as got in a little too late and out too early! Wanted to be a bit sure that Rev C was going to work, and out because seemed to be a bit of a lack-lustre day today, with little energy.

Yeh well done on the pips, it was a pretty perfect 1min trigger Reversal C set-up (ie 10/20flip inside the existing 40/60 flip and even inside the 60,) so no real need for a late entry particularly when supported by the perfect 5min re-entry 2 set-up @ the potential rbs of the prev 1hr sw hi zone.

 

[bbmac]

re post # 104

Following on from the 3 x 1hr pinbars up from the prev 4hr and daily swing lo=prev support=potential support zone, Monday's candle closes as a doji/pin indicating potentially more upside. Indeed price is bullish and has reached a current high of 6394 (50% 6656-6131) off the 6131 low.

Above current price is the previous 4hr swing lo=previous support=potential sbr zone and in that potential sbr zone is the descending 1hr/4hr potential resistance Trend line and the 50% fib of total 6740-6131 move @ 6435 and below here the 61.8% fib of 6567-6131 @ 6400, 50% fib of 6656-6131 being just below the zone @ 6394.

Price is currently trading @ 112% of it's20 day average range

G/L