gbpusd

British Pound Sterling vs Us Dollar

GBP/USD

Update 17/10/2017

Things are starting to get very interesting in cable. There is talk of rate rises, brexit and inflationary pressures everywhere. However, we stick to the phasing analysis as in my experience cycles underpin all macro news events – I have seen it too many times to ignore it.

Of course the question posed in the last update still stands – was the recent 18 month nominal low at the end of 2016 the 9/18 year low or is there one more 18 month lower low to come? Looking at a long term monthly chart (shown below) the evidence is compelling that the 18 year cycle is running short at 16 ish years and has made a major low. However, I am sticking with one more lower low to come given no evidence to the contrary for the moment at the medium term level. I have a tentative 18 month cycle peak in recently and if we continue to move down expect price to accelerate sharply – with news events given in the media as a catalyst. The downward sloping 18 month VTL shown below is key to this phasing, it must hold. Either way of course the next 18 month low will be a stellar buy for GBPUSD given the prospect of a multi-year bull market to come. Keen eyes will notice the 18 month FLD has been broken, having acted as resistance for a few weeks. The FLD target is not yet achieved so if the 18 month peak IS in that would be a bearish sign.

The next 80 day low is due early November – just around the time of the BoE rate setting meeting. At this point I wouldn’t bet against a small rate rise due to this cyclic evidence. Or at least more MPC members voting to hike. I expect the 80 day to find support at the 40 or 20 week FLD below at 1.28.

By Christmas this year we should have a firm picture of where GBPUSD is heading in this crucial 18 month cycle.

GBPUSD_£__daily17_10_2017GBPUSD_£__daily17_10_2017GBPUSD Monthly

 

 

Update 21/03/2017

The pound continued its path downwards towards the previous post’s zigzag target and has now been triangulating sideways out of the 18 month low. It was a very effective tool to gauge the target. Now we look closely at this 18 month low and consider whether it is the 9/18 year low or there is one more 18 month low to come. I prefer the latter. Certainly it is going to get very interesting in the next few months.

Shorter term price needs to come into a nominal 40 week peak circa mid May before any further descent. I expect resistance at the 18 month FLD and subsequently the 18 month/40 week VTLs. Watch this space!

GBPUSD_£__daily21_03_2017

 

Update 06/09/2016

One of the new features of Sentient Trader version 4 are the ‘zig zags’. I will be looking in depth at these when doing the full review of the software soon on this site. For now, GBPUSD provides a striking example of the 18 month, 40 week and 20 week zig zag projections in a confluence at a price point. I have posted the below image to refer back to it and test the efficacy.

GBPUSD_£__daily9_6_2016

Update 05/09/2016

It has been nearly a year since an update on this particular pair and what a year it has been! There has been continued downward movement since the last update as cable moves into an 18 month low forecast to be toward the end of this year. Currently I have it refined to the end of October in my favoured phasing. Since the last 18 month low in April of 2015 price has moved steadily downwards. Currencies are, in general, not my favourite instrument to trade but I do take a keen interest due to their excellent cyclicity. GBPUSD is a sterling (pardon the pun!) example.

It is worth looking at the medium term phasing I have after such a long hiatus. Keen eyes will notice I now have the new version of Sentient Trader, due out soon to the general public. One of the main new elements is the ability to perform a dual analysis (peak and trough). This has tremendous advantages when analysing currency pairs as you may well imagine. I will be writing a comprehensive review of the new features in due course on this blog, including the much anticipated ‘Composite Model Line’, shown on the charts in grey.GBPUSD_£__daily9_5_2016

Moving onto the phasing a 40 week low was made around the start of 2016 which moved up to the 18 month peak prior to the Brexit interaction. There was tremendous volatility and I did take a short a few weeks prior to the vote as I anticipated resistance from the 40 week FLD. We are close (month or two) away from an 18 month low. Lets take a closer look at the daily level, where I have two phasing analysis at the moment, both of which are valid in my opinion.

The first phasing is my preferred one despite the 40 week low being pinned to a low that is not the price low. Visually I feel this phasing works better, especially working with the peaks. The recent move up from what in P2 would be a 40 day low looks a bit too strong in my opinion and this is what has forced me to look again.

The 2nd phasing is the default analysis with no pinning. When price is whipped around by fundamental interaction cycles can become harder to identify, although the direction was clear in terms of which trade to take in my case weeks before the vote. This phasing anticipates the 18 month low mid-late November.

Within the next few weeks I will be able to discard one of these phasings and identify with more probability the major low. Shorts in this area if you are trading this pair are wise to hold for a month or so I think. You would be either taking a ‘D’ category (P1) or an ‘F’ category (P2) 20 day FLD interaction!

 

Update 07/09/2015

The short trade that I held from the last update was very profitable as the pound collapsed against the dollar, chart below.

Price is in the timezone for a 20 week bounce now and it could possibly be happening today. The 10 day FLD is just being touched at this point in time and a cross above that will setup a cascade projection through the 20 day FLD to the upside. I expect the 80 day downward VTL at around 15700 to be tested on this bounce. After that I think we will begin to get quite bearish indeed. I will enter long on a pullback here because the bounce is a touch too early and the 20 week target around 15000 has been undershot, indicating that either the underlying trend is strongly bullish or there is one more leg down to come.

Commonality in GBPJPY suggests a trough of 80 day magnitude (at least) is imminent.

Update 26/08/2015

An adjustment in the phasing sees the 18 month moved from a previous low in mid March to the actual low in April. The low in July is still considered the 80 day. From that 80 day low price has formed a fairly weak cycle, the 2nd of which in the first 20 week cycle of this 18 month. Chart below.

GBPUSD_£__daily_26_08_2015It was a choppy affair to trade with a poor ‘A’ category interaction  to start with. The only interaction on the long side that was profitable was the ‘E’ out of the 40 day low which formed on the 7th of August, just meeting it’s T2 target. Thus the stage was set for a bearish move down into the 20 week low, due mid September. I believe that move has now started with this ‘F’ category sharp move down. I am short and will hold for the next couple of weeks.

Update 06/07/2015

Cable moved down to hit it’s target yesterday evening in this ‘D’ category short described in the last update. It has also broken the 40 day FLD, projecting a target down to 15175. Is this 40 day cycle over? Too early to say with any certainty. Next trade is an ‘E’ category long on a cross above the 20 day FLD. I would be suprised to see this break the highs of the 18th of June as we have a 20 week trough ahead due early August.

Update 29/06/2015

This pair has been a tricky one as a possible large trough formed around the time of the UK general election, causing some fundamental interaction. At first glance the trough on the 13th of April is the main candidate for the 80 day cycle low (at least) but I favour the low on the 18th of March. This ties up with the EUR/USD and leads nicely into the latest 80 day low forming recently on the 1st of June.

Next up therefore is either a ‘D’ category short interaction with the 20 day FLD or, if you are using the 13th of April as the low, a ‘F’ category short trade. Same direction, different context. So, in terms of trading it is straightforward! Price has broken down through the 20 day FLD creating a T2 target for this pair of 15543. I expect resistance therefore at the 40 day FLD (blue line) after this move down.

GBPUSD_£__daily_29_06_2015

6 comments

  • Tim

    Just discovered this website and really enjoying the analysis. Thanks.
    Any ideas where the GBP will finally call a halt to it’s decline or is this it for us Brits?

    • Hi Tim,

      Thanks for your kind comments, although I do need to update the site for a lot of the instruments! I am much more active on twitter where I post charts pretty much everyday, including a lot of GBPUSD at the moment.

      As far as the long term goes I have a major interim 18 month (nominal) low for GBPUSD due around late December this year. Before that it will be generally downwards. If the large cycle low in 2009 was a 9 year nominal low we can expect the next nominal 9 year (currently running at 9.3years) around the middle of 2018. Plenty of trade opportunities, both bull and bear, at the smaller degrees too.

      • Tim

        Many thanks for the reply and for your outlook on Sterling. As a Brit residing abroad I still ‘live’ in GBP so these are pretty dark times to navigate. I have discovered your twitter and am enjoying your analysis.

        • Glad you have found this useful Tim, it can shine a light on an otherwise tricky situation if you live abroad. Hope you are enjoying the twitter updates too. 20 week cycle low soonish I think…

  • Tim

    I do follow your twitter closely but thanks for this more detailed assessment on the prospects for Sterling. The chart on your twitter is somewhat more alarming with the composite line heading all the way down to the 80’s but I did also read your reply to asentence.

    • Thanks again Tim, yes one should take the CML with a pinch of salt, especially as it is a new feature in the latest version of ST. It is an excellent timing tool though. Of course the general direction and timing of the CML is dependent on the phasing analysis. If the CML deviates from the historical price too much it can be an indication of a poor analysis. The trough of the 18 month cycle is due now in mid October, according to my favoured analysis as shown. The shape of the first 40 week cycle within that 18 month will resolve whether the low in 2009 was a 9 year nominal low and we can expect the next 9 year low in the summer of 2018. In that case I would not be suprised to see .80s before a multi year bull back up.

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