ForexLive's Guest Trader series
A massive thank you to Luke as he completes his last post of the week. It’s good to see such a sensible trading head on such young shoulders. You can check out his prior posts here. GBP/AUD is the focus of today’s topic.
The motto of this post is the trend is your friend. So this is my last post for the guest trader slot, thanks to all the people commenting on the thread. Im just at the start of my journey into the trading world so all the comments and charts shared from you guys really does help me. Doing the guest trader slot has really helped me as well. Its shaped a new approach to how I look at things, writing my trade set ups is something I have never done before. I just keep the ideas to myself swirling around my head. I have found writing them down really helps. It’s something I’m probably going to keep up for personal gain.
Where has this week gone though, it’s been a busy one but as they say time flies when your having fun. This week I have posted about pairs that I like to trade on a longer time frame more than a few days or a week and I’m going to do the same with this post. For my final post I want to look at a trending market. There’s a lot of markets out there at the moment stuck within the same range USD/JPY and EUR/CAD to name two. A pair that has broken out recently and I foresee to keep on moving higher is the GBP/AUD.
I have been buying this pair since mid summer, in small units. As I said in my previous post, when playing a pair over a longer period I like to buy in smaller units and that way when I see fit add money and take money off the table but still holding my main position in this pair. I like this pair on both a Macro and technical perspective and this week both of these factors played out perfectly. With the RBA cutting rates moving away from the strategy wait and see to cutting rates to 2.25%. Although the Bank of England are no where near hiking rates YET! They most certainly are not near cutting rates either. Thus the UK economy is a far better place to park my cash right now long term than Australia.
GBP/AUD weekly chart
I’m just going to look at the weekly chart with this pair as I feel this chart says it all in one. The 61.8% retracement of the high recorded in 2008 comes in at 1.9212. We came up to this level in January last year and was rejected moving further down throughout the year until we found the base and year low in September coming in at 1.7212.
From this base we pushed higher testing the 61.8% retracement in December. We broke above the high set in January 2014, breaking into the 61.8% retracement however never managing to close the weekly candle above the level.
Subsequently the prevailing 4 weeks from the 21st December to the week begging the Sunday 11th January we moved lower not managing to break below the 30 Day moving average. This is where buyers stepped in and pushed the pair higher.
The week beginning 25th January we managed to close above the 61.8% retracement line closing the week at 1.9343
The reason, I said further up the post from a technical perspective this week, this pair played out nicely, is because the pair came down to test the 61.8% retracement line. Buyers however came in and successfully protected the pair at this level. This says to me not only are the buyers in control but they are willing to take this pair higher. Personally and I know people will disagree but that’s how markets exist a buyer and a seller it takes two to make a market. I can see, and will be holding this pair and buying dips to play out and test the 50% retracement from the high in 2008 and the bottom in 2013, which is marked by the middle purple line coming in at 2.0716. A long way away yet but I can be patient. It may never come but I have my risk defined if it doesn’t.
Right, well that’s it from me.
Once again thanks to the Forexlive bosses and community for having me. Writing these posts has not only been enjoyable but has helped me improve as a trader. I’m sure this won’t be the last time you see me pop up as I’m always commenting in the threads about something.
All the best and back to the dissertation I go.
Lproject92 Luke Mumford
If you would like to have a go at Guest Trader then we’d be delighted to have you. Just send us an email to info(at)forexlive(dot)com and I’ll be in touch.
