What the Fibs?!! This is why my husband thinks I’m nuts LOL.

It’s poetry to me.

How EURGBP Holds During Correction

When the EURGBP trends, it tends to hold the 50% Fibonacci level to the pip. In fact, a break of the 50% Fibonacci level tends to signal a reversal of the trend with price action to move in the same direction of the correction. When it really trends, it will hold the 38.2% Fibonacci level to the pip. If it breaks this level, it will invariably move towards the 50% Fibonacci level.

Just a tip. When you trade a select few currency pairs, you get to know its personality. And you can take advantage of that in your trading.

The above graph suggests that income inequality rather than sheer poverty is what leads to uprisings by the people. In both Tunisia and Egypt, the top 10% of the population take most of the country’s income for themselves and don’t leave much for the rest.

Morocco, Algeria, Gabon, and South Africa also seem to be in this category. While Nigeria and the other African countries don’t have such a huge income inequality.

Which means that the next uprising is more likely to happen in Algeria or Morocco rather than in Nigeria.

This is from the comments of this article and I couldn’t agree MORE.

Since good governance is the start and impetus of real change and economic prosperity in Africa, it is important to see how the countries measure up. Pictured here are the top 20 ranked countries in the 2010 Ibrahim Index of African Governance. Click on the chart to view the data in its entirety.

(via Mauritius top ranked country in 2010 Ibrahim Index | How We Made It In Africa)

Americans have finally stopped borrowing money. It helps that the banks stopped lending it out to begin with. So people stopped asking for it. People started buying things, including houses, with money they actually have.

BUILD EQUITY. Not debt.

(Chart courtesty of Here Is The Simple Reason Why QE Is Unnecessary | zero hedge)

EUR/GBP Struggles Below 0.84

Breaking that 0.8400 level was a monster bearish move by the EUR/GBP currency pair. The descending triangle that was forming on the weekly chart played out. Now that we are below that level the GBP will invariably strengthen. The hourly chart above is a snapshot of the end of last and the open of this new week. After gapping higher to a high of 0.8359, it is looking like a failure of the 0.8300 whole number is inevitable. The smaller Fibonacci is the move higher at market open while the bigger Fibonacci measures the start of the move on Friday at 0.8208 through the top today at 0.8359. This larger Fib lands at important levels. Keep an eye on these levels for further strength or weakness in this pair.

Fundamentally, still the market remains focused on the Eurozone… to the benefit of the Great British pound.

This is why I love tethering. All mobile devices should. I did the math in my head and can post the 10 minute chart and pull the trigger. All while riding to the airport. SMH at technology. I like the hourly chart too. 

A More Meaningful Correction This Time?

After a decent correction and a break of the range earlier this week, the GPB/USD made new lows in today’s session at 1.4870 but completely reversed and made new highs 10 pips from the 1.5000 whole number.

The daily chart has a strong downtrend that recently made 2 bearish waves from 1.5815 to 1.4780. In the circle is what may be shaping up to be a FAILED 3rd bearish wave which looks to have bottomed at a higher low with today’s 1.4870 low.

While I would consider a break above 1.5000 bullish, 1.5033 is the area to watch as the 50% Fibonacci retracement level of this latest push to the downside. A break and subsequent close above this level sees the pair move back towards 1.5200 where prices topped out on at the start of this trading week.

Update on EUR/GBP

The “breach” of the 50% Fib on the above weekly chart had no mojo at all turning into a mere price probe. The 0.8813 level provided strong resistance as price made a high of only 0.8816 and has now staged a deep pullback from that high. We’ve seen strong resistance at these Fibonacci levels before from the EUR/GBP so this price action should have been expected behavior.

That bullish chart pattern on the hourly chart also held. I was fooled by the false breakout below the rectangle’s bottom at 0.8700 to 0.8686. If it had been a sustained break below there would have been a confirmation close below the bottom of the rectangle. But price immediately regained the whole number and went on to rally to a high so far at 0.8816 in the next 2 trading sessions.

Now during the Asia session, the EUR/GBP has already staged a whopping 100% retracement of yesterday’s rally with a low on the day already of 0.8764. Though price is finding support at this level, we need to be aware of what this level of retracement means and that is a reversal of the intraday uptrend.

I am staying away from this pair at the moment. EU rumors in regards to soverign debt is really affecting the euro. Also, news from the UK is due out in a couple hours (IP and BoE inflation report). I’ll be watching the 0.8813 level. If price finds resistance again at 0.8813, I will look for price to reverse from there. On the other hand, a break of this level targets former-support-turned-resistance at 0.8954.

Trade what you see folks, not what I think.

fmfx:

Cable At Multi-Month Lows

The GBP/USD broke out today to new multi-month lows below the 1.5921 support at 1.5864. Price, then, bounced and retraced to as high as 1.5936 capped by the 38.2% Fibonacci level at 1.5941. Now into the New York close, cable has resumed its downward momentum with price back below the 1.5900 whole number.

We mentioned at the start of the week on Sunday 3 important things:

1. that as long as 1.5920 support held expect the GBP/USD to rally back towards 1.6100. Cable made a decent attempt with today’s high at 1.6066 when price made a low yesterday above support at 1.5931.
2. that it would be non-scheduled announcements that would move the markets this week. JP Morgan’s announcement stopped the GBP/USD correction rally dead in its track spurring the reversal back in the direction of the LT down trend. In addition, worries about credit quality out of Abu Dubai fueled risk aversion thus keeping the pressure on the currency pair.
3. that if support at 1.5920 was broken, then retracement was over and expect a breakout to the downside. Cable broke out 54 pips before finding support at the lows with little regard for the 1.5920 support level. Looking at the above hourly charts, the GBP/USD slid 148 pips in 2 hours.

With price staying and closing below 1.5920, now previous support, cable now targets the 1.5801 ST on its way to completing the quarter to 1.5750.

A close below the 1.5900 whole number would further confirm the weakness of the GBP/USD currency pair. With fundamentals and technicals aligned right now and price remaining 75 pips (and more) below the 1.6000 large quarter point, I am off cable short suspension! But I did take advantage of the bearish developments in the GBP/USD without trading it. Rather, I traded the EUR/GBP and now manage a long position started last week, booking 215 pips and adding on dips. With this position, I can stay away from the USD until 2010.

I do still see more weakness in cable. And I find it very interesting that the USD is now benefiting from BOTH risk aversion AND positive US fundamentals. However, trade what you see, not what I think.

fmfx:

EUR/GBP Poised to Rally Further

The EUR/GPB has been in a downward channel since making the near double top high at 0.9150 on December 3 and December 4. After 3 bearish waves, the pair made a low at 0.8848 near ST support at 0.8831 last week. Since this low, however, the EUR/GBP has made higher lows and higher highs even as it remains below the 50% Fibonacci retracement of the 3rd bearish wave (0.9047-0.8848) at 0.8958 on the daily chart. A breach of that level gives signal that this price action may actual turn into a rally rather than just mere consolidation after the low.

If you take another look at the EUR/GBP daily chart (from this article), you can recall the pair has broken the upper trendline of the LT downward channel from the 0.9410 high on October 13. Price needed to break the 0.8831 support level in order to resume that down trend. However, with price finding support before 0.8831 and now in a first bullish wave, the EUR/GBP is well poised to move higher. Resistance naturally lies at the 0.9000 whole number, large quarter point, and major psychological level. Before the whole number, price still has to take out 0.8958 50% Fibonacci level. After 0.9000, the November 12 high at 0.9062 is resistance to keep an eye on. A sustained break of this level gives the clue that the broken trendline formation is valid and a rally back towards the 0.9150 highs could come under assault. Only a break of 0.8831 reverses this bullish momentum.

As usual, trade what you see, not what I think.

I traded what I saw. I looked at this chart and it was very clear that I needed to cut my losses on my short position prior to the news. And even despite what I saw, I started to think:

• I’ll just hold to BoE meeting minutes. They could be GBP-positive… right?
• The trend is clearly to the downside. The EUR will fall apart… right?

Check out price after making the 0.8831 lows back in November. A rally quickly followed that took price to 0.9150 and broke the MT down channel. Looks VERY familiar doesn’t it to how price is behaving right now. I also see that the recent low at 0.8848 is still a higher low than 0.8831. I see all the higher highs and higher lows - the very definition of an up trend. And I see the poor UK economic data that has been released so far this week including the BoE minutes. So I did it. I pulled the plug and lost 157 pips. Still very proud of the fact that I traded what I saw. It’s one thing to see it but it can be a whole other thing to trade it.

fmfx:

GBP/USD managed to make a new low this session at 1.6024 to start the Christmas week of trading and complete the quarter to 1.6000 large quarter point and major whole number.

Next major ST support lies at 1.5801, the whole number preceding the large quarter point at 1.5750; then 1.5750 large quarter point itself; and lastly, 1.5701 - close enough to the 1.5700 whole number.

I was wrong to stand in the way of this train this morning trying to long cable. It was also unwise to trade the pair without adequate study at the start of the week to see if my plan from last week still holds. It did as price made its way to 1.6000 large quarter point, whole number, and major psychological level.

This morning, @50pips was wise to remind us that our number one rule is to preserve our capital in these kind of thin markets. As such with 1.6000 quarter completed, I am staying away from GBP/USD pair for the rest of the week, possibly through the end of the year. Merry Christmas lesson to me.

Besides, the risk:reward doesn’t make sense for me until price can find its way below 1.6000 and hold 75 pips below the whole number. Both those conditions must hold in order for me to take a trade on cable before 2010.