Momentum Gathering for GBP/USD as Breakout Eyed Above 1.6260, 1.6355

Talking Points:
- UK GDP came in line with expectations at +0.8% (q/q) and +1.5% (y/y).
- Short covering rally in British Pound – every other major suffers.
- Implications for GBPUSD breakout are of high significance.

A scan of this morning’s best and worst performers via the Strong/Weak app shows that the British Pound is having an incredibly strong day, netting nearly +1000-pips cumulatively against the major currencies covered by DailyFX Research. The majority of these gains have occurred during the European session, as traders continued their rotation away from the commodity currencies (which began last Thursday) and into the European growth currencies (with price action the past three days, including today, confirming this trend).

Market participants may have been waiting for confirmation of the UK’s growth resiliency in the 3Q, as today’s figures have spurred a significant leg higher in the British Pound across the board. Notably, the GBPJPY continues to make headway after clearing the 2009 high of 163.05/15 last week.

Further gains may be difficult to come by over the next few days given thinner holiday trading conditions, but the pair is on track towards a significant Fibonacci level: the 38.2% retracement of the 2007 high to 2011 low at 168.17

TECHNICAL ANALYSIS – CHART OF THE DAY
GBPUSD Weekly Chart: January 2009 to Present

The more significant price action may be occurring in the GBPUSD, which broke above its two-month sideways range top at $1.6260:

- The range, from 1.5880 to 1.6260, has governed price since the second week of September.

- While there was potential for a Double Top, it now appears that a bullish Bull Flag has been forming with respect to the July low.

- The measured move for the GBPUSD on a weekly close above 1.6260 would call for a rally into 1.6745/50, the 61.8% extension of the flag coinciding with the July 2011 highs.

- Confirmation of the upswing will be achieved with (ideally) the month of November closing above 1.6300/55, the yearly high set on the first trading day of 2013 and the descending TL off of the 2009 and 2011 highs.

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GBPUSD Range-Bound Conditions Continue

Trading Setups / Chart in Focus:

GBPUSD – Sterling/dollar stuck in trading range

The GBPUSD is still stuck in a trading range between about 1.5900 – 1.6260. Until we break outside of this range one way or the other, or get a price action signal from one of the boundaries of the range, there’s not much to do. Price has shown strength this week off 1.5900 support and could challenge 1.6260 resistance again before moving lower.

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Dollar Suffers First Two-Day Drop Since Debt Ceiling Standoff Ends

Dollar Suffers First Two-Day Drop Since Debt Ceiling Standoff Ends

We are a day away from the release of the 3Q US GDP release and two from the October NFPs – event risk that can materially alter FOMC taper forecasts and thereby the US dollar’s bearings. In the lead up, however, a lack of conviction and lingering volatility can create unusual trading conditions. The 0.1 percent slip from the Dow Jones FXCM Dollar Index (ticker = USDollar) marked the first consecutive decline for the benchmark since the deficit standoff ended October 17 and ultimately marked the turning point for a bull wave. For event risk, the past session offered up the ISM’s service sector activity survey for October. A 55.4 reading from the benchmark bested expectations, but it was the jump in the employment component that perhaps generates a little more interest in the lead up to official labor stats due Friday. The next trend we see from the dollar, carry and broader financial markets is very likely to originate from risk trends that are touched off by stimulus expectations. That leverages the importance of Fed commentary as well. It seems there is concerted effort to prepare the market for the Taper.

Euro Drops after EU Downgrades Region’s Growth, Debt Outlook

When it rains, it pours. The euro has already been pummeled this past week by souring rate expectations after the disappointing inflation report for the Euro-area. As we head into the ECB decision that will verify or dispel the resurgence of dovish fears by euro traders, there is a natural inclination for the speculative tides to moderate. Yet, the EU’s (European Union) Fall economic forecasts would ensure the concern stretched a little further. According to the authority, the group that shares the euro would grow 1.1 percent versus the 1.2 percent projected in May. More concerning, the jobless rate was seen unchanged from the current record high. Furthermore, individual member countries were looking at greater problems. Greece was still looking at a 4.0 percent contraction this year (slightly better than May’s view), Spain’s deficit ratio was expected to balloon while Ireland and Portugal are seen having issues with accessing the market.

British Pound, Yield Forecast Rise on Upgraded Growth Forecast

In direct contrast to the unfavorable turn for the Eurozone’s growth outlook, the UK was given a big boost for its own prospects. According to the Fall forecasts, the United Kingdom will grow 1.3 percent this year (previously expected to be 0.6 percent) and 2.2 percent in 2014 (previously 1.7 percent). That is a substantial upgrade, but one that we have seen reinforced by more than a few items this week. The CBI’s own upgrade last week was a smaller magnitude, but sets a similar tone. Meanwhile, the Markit service sector activity survey for October printed the highest reading since 1997. All of this translates into increased fodder for rate speculators to doubt the BoE’s cautious forecasts for rate hikes to be delayed until 2016. Meanwhile, the swaps curve has not steepened materially in response to the recent run of data – though the 10-year gilt yield jumped 3.7 percent. Perhaps this represents fundamental room for the sterling to cover after Thursday’s BoE decision…

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Weekly Forex Trading Forecast: Market Weighs Fed Taper, ECB Stimulus

US Dollar Forecast - US Dollar Ready for Further Gains, but What Stands in the Way?
What a difference a week makes. The US Dollar surged versus the Euro and other major forex counterparts and the Dow Jones FXCM Dollar Index posted its single-largest weekly gain in 5 months.

Euro Forecast – Euro Collapse Versus Dollar as Much an ECB Factor as Risk Trends
The Euro was the worst performer of the majors – and the drop it suffered was nothing short of spectacular.

Australian Dollar Forecast – Australian Dollar Sensitive to RBA Decision and Risk Trend
We’ve argued in favor of a significant Australian Dollar recovery since early August.

Gold Forecast - Gold Sell-off Intensifies as USD Firms- GDP, NFPs, in Focus
Gold prices plummeted more than 2.6% this week with the precious metal trading at $1313 ahead of the New York close on Friday.

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3 Steps to Day Trade an FOMC Breakout

Talking Points

• Trading a breakout strategy affords many benefits when day trading.
• Order placement can be aided through the use of Camarilla Pivots.
• Learn to place stops and limits using support and resistance.

Trading intraday breakouts continues to be a favorite methodology for trading news events such as todays FOMC (Federal Open Market Committee) rate decision. While rate expectations are forecasted to remain the same, it can increase the possibility of a price breakout on pairs such as the EURUSD later this afternoon. Breakout traders will enjoy the advantages of having clear points of entry through the use of support and resistance, all while having the ability to trade the news with either market or entry orders.

Sound good? Today, we will cover a 3 step process to day trading the EURUSD using pivot points. Let’s get started!

Learn Forex: EURUSD 30Minute with Pivots

ক্যাপশন যুক্ত করুন

Apply Pivot Points

While this first step may seem like a no brainer, it is important to add pivots to the graph so we can trade them! Camarilla pivots used in the example above, are available to traders through FXCMs Marketscope 2.0 charts. Camarilla pivots are designed to show key levels of support and resistance which can be perfect for identifying a potential Forex breakout!

When using Camarilla pivots for a breakout, traders should keep an eye on the S4 (support) and R4 (resistance lines). These areas are identified as market extremes and in the event that momentum pushes price through either of these levels, traders will want a plan of action to trade their favorite pairs.

Place Your Entry Orders

Once key intraday levels of support and resistance are found, trading a breakout is a fairly straightforward process. Traders will look for a strong continuation to the upside in the event price moves through resistance, prompting new Buy positions. Conversely, if price cracks S4 support traders will look to sell continued downward price momentum.

It should be noted that traders can execute a breakout strategy using entry orders, or by placing a market order. Market order traders have the luxury of being in front of the computer. This allows traders to enter immediately, or wait for a candle close for confirmation if preferred. Entry orders allow traders to set orders and walk away from their computer. If either S4 or R4 is broken, they will be ready to enter into the market at the best prevailing price. If you choose to trade with entry orders, consider an OCO order. This way, an entry to buy can be placed above the R4 pivot, and an entry to sell below S4.

Manage Risk and TakeProfit

As you can see breakouts can be an easy and effective way to approach short term trading the Forex market. However, it is important to note that false breakouts can and will occur! Traders should always prepare for price moving against their entry through the use of a stop order. The use of Camarilla pivots can also make the process of risk management easier.

In the example below, we have set up a potential breakout on the EURUSD above R4 resistance. A stop has been placed at R3, for a 20 pip stop loss. From here, traders can extrapolate a positive risk reward ratio of their choosing. Looking to gain more profit in a winning trade, limits are to be set at least 40 pips away from the breakout entry. This would setup a preferred 1:2 Risk/Reward ratio.

Conclusion

Using a day trading methodology to trade breakouts can be made easier through the application of Camarilla Pivots. Remember that this strategy is broken down into 3 essential components and can be useful when the market approaches a potentially volatile economic event.

Following this 3 step strategy will allow for traders to identify and execute an easy to follow breakout strategy. The next part of the equation is to then determine your trade size. For more on that, follow this three step guide to determine your trade size.

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GBPUSD setback far from damaging whilst above 1.5885; risk still higher through 1.6255

• A notable Tuesday dip, but still resilient digestion whilst above chart props at 1.5895/85
• We favour consolidation through midweek, but still see the skewed threat of a re-energized bull theme with the 1.6255 Sept peak key.
• Only below 1.5885 signals a bear shift.

WHAT CHANGES THIS?
Upside: Above the peak at 1.6255 re-energizes upside pressures through the cycle high, 1.6382 with overshoot risk into Nov towards a 2011 failure peak at 1.6617
Downside: Below 1.5895/85 signals a more notable bearish reversal down to chart/ pivot supports at 1.5775/50/10.


Weekly GBPUSD

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What to Expect From Your Forex Account ?

As they place trades & orders in our account, keep in mind that your strategy of when to place orders is THE technique & do not require over emphasize each pip, trade, or market movement. Each trade is of a thousand insignificant trades. Trading is a game of three steps forward then two steps backward. When you expect perfection, you will be disappointed. Therefore, expect losing trades.

You may be wondering, how plenty of losses are needed to become a better winner?

A common misconception is that a strategy's success hinges on a high win ratio. That is basically not true. A number of the best strategies win only 40-50% of the time.

What is a lovely win ratio? There is no grand formula. It is not a size fits all approach, but choose the strategy's edge using the win ratio. Then confidently trade your technique & let the market's emotions choose the result of the trade.

Finally, expect losses to be incurred & prepare for them through low leverage so all of your equity is preserved.

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EURUSD Retraces

EURUSD – Euro/dollar retraces

The EURUSD has begun retracing lower over the last two days as the uptrend takes a rest for now. We still consider the uptrend in place whilst this market is trading above 1.3650 on a daily closing basis, as mentioned in this week’s weekly price action outlook, and we can watch for price action buy signals from support as this market rotates lower, in order to trade in-line with the existing uptrend.

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Weekly Trading Forecast: Focus Remains on US Risk as NFPs Print Tuesday

US Dollar Forecast - US Dollar Traders Link Long-Term Trend to Key NFPs Release

The Dow Jones FXCM Dollar Index (ticker = USDollar) dropped 1.2 percent this past week – the sixth drop in seven weeks.

Euro Forecast – Euro Gaining versus Dollar but Struggling Elsewhere amid Middling Data

The Euro failed to capitalize on bolstered risk flows thanks to a medium-term resolution to the US fiscal deadlock, although it did manage to make significant progress towards its yearly highs ($1.3710 on February 1) against the US Dollar by the end of the week ($1.3704 on October 18).

British Pound Forecast -British Pound Looks Dangerously Overstretched - How do We Trade

The British Pound surged versus the downtrodden US Dollar and yet finished just short of year-to-date peaks.

Japanese Yen Forecast - Japanese Yen Strength to Be Undermined by Slowing Inflation

The Japanese Yen regained its footing against the dollar, with the USDJPY slipping back below the 98.00 handle, and the pair may continue to give back the rebound from earlier this month as it carves a lower high just below the 99.00 region.

Gold Forecast - Gold Eyes Monthly High Ahead of NFPs as Bearish Momentum Falters

Gold prices rallied 3.24% this week with the precious metal trading at $1313 ahead of the New York close on Friday. The advance comes amid a rally in broader equity markets with the S&P making fresh record highs while a substantial sell-off in the greenback was further exacerbated as the government shut-down pushed out expectations for a Fed tapper this year. Subsequently, gold rebounded off key support at $1268 with the rally breaching a medium-term technical formation.

Australian Dollar Forecast - Australian Dollar Braces for Impact as US Data Backlog Emerges

We’ve argued in favor of a significant Australian Dollar recovery since early August.

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EUR/USD. Forecast for October 8, 2013

Yesterday data on labor in the US was not revealed. Now it is not clear when Nonfarm Payrolls are to be issued; probably it will happen this week.   Today optimistic data on Europe is expected. Trade balance in Germany in August (at 10:00 UTC+4) is expected to be 15.1 billion euro vs. 14.5 billion in July; France’s trade balance is estimated to be -4.8 billion euro vs. -5.1 billion euro. At 14:00 UTC+4 data on Factory orders in Germany in August is issued; forecast 1.2% vs. -2.7% in July. If there is no other relevant news, the euro may enter the range 1.3591-1.3607. However, on the whole, the expectations are declining. The first target is the range 1.3537/42 (on the 4H), when the rate consolidates under it, we expect the decline to support of trend line on the daily chart, 1.3492. 

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Forex: Dollar Eyes Fed-Speak, Impact of US Fiscal Woes on QE Taper Key

Talking Points

• US Doller Recovers, Yen Declines as Markets Digest Yesterday’s Volatility
• Quiet European, US Economic Calendar Keeps All Eyes on Washington DC
• Fed-Speak in Focus to Gauge Impact of US Budget Impasse on QE “Taper”

Financial markets were in corrective mode in overnight trade. The US Dollar mounted a cautious recovery after posting the largest daily drop in nearly three weeks over the preceding 24 hours. Meanwhile, the Japanese Yen declined as the Nikkei 225 advanced, sapping demand for the safety-linked currency. Japan’s benchmark stock index plunged 1.2 percent yesterday to hit the lowest level in five weeks.

This brief respite seems unlikely to last however as continued deadlock over US budget policy drives worries about the implications of fiscal retrenchment in the world’s largest economy on global growth. Indeed, a relatively quiet data docket in European and US hours will keep the spotlight firmly pointed at Washington DC.

S&P 500 futures are trading flat for the time being, pointing to a lack of conviction behind risk appetite trends for the time being. The situation remains fluid however, meaning an unexpected headline pointing to a breakthrough in Congressional negotiations or signaling deepening deadlock may quickly change the sentiment landscape.

A dose of “Fed-speak” represents a wildcard. Cleveland Fed President Sandra Pianalto and PhiladelphiaFed President Charles Plosser are scheduled to speak. While neither is currently voting members of the policy-setting FOMC committee, both sit in on its meetings and may thus offer some valuable insight as traders attempt to nail down the timing of the first cutback in QE asset purchase. Commentary that touches on the impact of the US government shutdown on stimulus reduction plans ought to be particularly market-moving.

Asia Session:

GMT	CCY	EVENT	ACT	EXP	PREV
21:00	NZD	NZIER Business Opinion Survey (3Q)	38	-	32
23:01	GBP	BRC Sales Like-For-Like (YoY) (SEP)	0.7%	2.0%	1.8%
23:01	GBP	RICS House Price Balance (SEP)	54%	45%	41%
23:50	JPY	Current Account Total (¥) (AUG)	161.5B	520.0B	577.3B
23:50	JPY	Adjusted Current Account Total (¥)(AUG)	351.8B	634.1B	333.7B
23:50	JPY	BoP Current Account Balance (YoY) (AUG)	-63.7%	18.1%	-12.9%
23:50	JPY	Trade Balance - BOP Basis (¥) (AUG)	-885.9B	-880.0B	-943.3B
0:30	AUD	NAB Business Confidence (SEP)	12	-	4
0:30	AUD	NAB Business Conditions (SEP)	-4	-	-7
0:30	AUD	ANZ Job Advertisements (MoM) (SEP)	0.2%	-	-2.0%
1:45	CNY	HSBC/Markit Services PMI (SEP)	52.4	-	52.8
4:30	JPY	Bankruptcies (YoY) (SEP)	-11.92%	-	-15.30%
5:00	JPY	Eco Watchers Survey: Current (SEP)	52.8	52.0	51.2
5:00	JPY	Eco Watchers Survey: Outlook (SEP)	54.2	50.9	51.2
5:30	AUD	Foreign Reserves (A$) (SEP)	53.0B	-	55.7B

Euro Session:

GMT	CCY	EVENT	EXP/ACT	PREV	IMPACT
5:45	CHF	Unemployment Rate (SEP)	3.0% (A)	3.0%	Medium
5:45	CHF	Unemployment Rate s.a. (SEP)	3.2% (A)	3.2%	Medium
6:00	EUR	German Trade Balance (€) (AUG)	13.1B (A)	16.2B	Low
6:00	EUR	German Current Account (€) (AUG)	9.4B (A)	14.2B	Low
6:00	EUR	German Imports s.a. (MoM) (AUG)	0.4% (A)	0.3%	Low
6:00	EUR	German Exports s.a. (MoM) (AUG)	1.0% (A)	-0.8%	Low
7:15	CHF	CPI (MoM) (SEP)	0.2%	-0.1%	Medium
7:15	CHF	CPI (YoY) (SEP)	-0.1%	0.0%	Medium
7:15	CHF	CPI - EU Harmonized (MoM) (SEP)	-	-0.4%	Low
7:15	CHF	CPI - EU Harmonized (YoY) (SEP)	-	0.4%	Low
7:15	CHF	Retail Sales (Real) (YoY) (SEP)	-	0.8%	Low
8:00	EUR	Italian Deficit to GDP (YTD) (2Q) (2Q)	-	7.3%	Low
10:00	EUR	German Factory Orders s.a. (MoM) (AUG)	1.0%	-2.7%	Medium
10:00	EUR	German Factory Orders n.s.a. (YoY) (AUG)	3.9%	2.0%	Medium

Critical Levels:

CCY	SUPP 3	SUPP 2	SUPP 1	Pivot Point	RES 1	RES 2	RES 3
EURUSD	1.3476	1.3524	1.3552	1.3572	1.3600	1.3620	1.3668
GBPUSD	1.5898	1.5984	1.6040	1.6070	1.6126	1.6156	1.6242

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