gbp/usd update 7-24-08

click to enlarge


Let’s resume our gbp/usd tracking for a moment.

Today we can see that the 4hr gmt bar closed right above at 61% daily Fibonacci. So, we can assume that price will attempt to move up and challenge 50% daily fib at 9899. Why there? Because, That is the location of overhead price resistance as well as 50% fib resistance.

Both of these levels are untested after the breakdown through them. Most moves cannot be trusted to continue fully until the broken support or resistance level has been tested.

The 4hr trend is currently down so we would only be looking for opportunities to go short.

When price reaches our resistance area we don’t want to enter just because price touches that level. When price gets to resistance we want to drop down to our 1 hr chart and wait for the close of that 1hr bar to see if we have a setup. It is only then that we look for an entry trigger.

As I write this we are currently at 23% fib resistance where we can normally expect a pause and this is the first level we must close above before we can make it to the price resistance level of 9899.

You must not enter on the touch of resistance especially in this case because the 2 bars ago we closed with a long range down bar and it was a public.

You can best believe that operators are going to at least attempt to fade this bar up to near the high of that public and the high of that bar is a 61% fib resistance of the last down swing.

So, when we look at our 1hr we currently see the market is trying to form a bull pivot reversal. We won’t know until the end of this current hour.

We want to see this bar close higher than the high of the last bar (9849)
With higher volume than the previous 1hr bar or strong professional/operator participation.

If that should happen we will have a bullish 1hr setup. We would then look for our trigger which will be a pullback to 61% Fibonacci (9841) where we would enter long. This would be a counter trend entry so the risk on this one would be enhanced more than if we are entering with the trend.

If we get our trigger we would look to take profits at 9900 (50% daily fib resistance).

Our stop would go 6 to 11 pips below 61% fib and the low of the day ( 9815)or on 1hr weakness after entry even if stop is not hit. These are composite support for the moment.

So, no setup means not entry. No trigger means no entry. These are safety guidelines to keep your risk small.

Cheers, Jerry
jerry@foretradingmajic.com
tradingmajic1@gmail.com