Lots of up and down volatility in the GBPUSD
Lots of news. Lots of volatility. Of late we have seen:
- UK retail sales weaker.
- BOE votes 5-3 to keep rates unchanged with 3 looking to raise rates.
- Brexit negotiations are to restart next week.
- May survives the election surprise (for now at least).
Technically, the pair moved above the 1.2768-74 area. That area has been a swing level going back in time (see prior posts about the area here). That spike higher came on the back of the vote.
Since then, the price has moved back below the level and retested the 100 hour MA at 1.2760. Admittedly in trading yesterday, the market took the price above and below the area on two separate occasions (see red shaded area).
What does that say?
The market is struggling with the news, with the implication of the news and that is messing with my technicals too. Guess what? Everyone is confused and the price action shows that.
What do we do?
We can take a step aside. If the markets are not behaving the way you expect them to behave, you do have the option to not trade that currency pair (or currency). Don't look to get in a bar room brawl if you don't have to. You can get hurt.
If you do trade, be cautious, patient but be consistent with your approach. Just because the market behaves badly against the 1.2769-74 area, I don't throw out the trading approach. Traders need to be consistent in good times and bad (and the bad/volatile times are bad for everyone).
Besides volatile price action tells me something. It tells me the "market" is confused. For the GBPUSD, it also tells me the breaks above are failing.
If you focus on today's activity, we know the the price spike higher failed. If you went long on the break, you should be stopped out on the break back below the level (yellow area). But also note the next bar after the last failed break higher. Traders used the 1.2769-74 area as a ceiling again.
Sellers remain more in control. A move below the 100 hour MA is now eyed as the next key level. If it holds and you are short from above, get out or reduce your position (even if in mid range).
Conversely, if the 100 hour MA is broken, the shorts are more in control. ON a break, you can now use the 100 hour MA as a stop.
When the markets are sloppy (and the GBPUSD is sloppy)
- Recognize it is sloppy for everyone and every approach. It is that way for a reason. SO be patient.
- If the market does not do what you expect it to do, don't stay in the fight. Get out. Taking a loss is ok(especially in these types of market).
- See if there are any clues that give you more confidence that the "market" is getting out of its funk.
- Try to be patient and trade close to your technical levels so risk is limited. You can get chopped up even more if you have trade entries in the middle of support/resistance areas. Let the others enter there.