Fate of Major Forex Pairs 

In this article we are going to take a look at the GBP/USD in particular, but for the most part it all the points discussed will also imply to EUR/USD, AUD/USD and NZD/USD as well.

As you might already know the GBP/USD is on a steep downward trend and already caused a lot of pain to the investors who were on the wrong side of the market. While the fact that GBP was over valued for many years is true, this downfall was bound to happen and right now it is at an interesting level.

By interesting we mean, it presents a risk reward ratio unlike any other. So, let’s look at some numbers along with both the fundamental and technical approaches.

Fundamental Factors

The fundamental with regards to the Great British Pound looks overall bearish. All the last three readings on GDP and Manufacturing Production have been either extremely bearish or neutral.

The thing with relying on fundamental factors is that, it lags like most of the indicators. However, it is best when used with confluence with technical analysis. All the mainstream media outlets are showcasing big move towards the downside and that claims are backed up by scenarios revolving around Brexit.

However, on the bright side, things have really changed in a way which favors the bulls. Obviously do not expect the price to turn around anytime soon, but here are some stats for you.

The export from the UK has increased sharply and now since their currency is getting devalued, it means that they will be able to sell more for much cheaper price. Common sense alone will tell you that, the markets are just overreacting and in time the bulls will be born.

Technical Analysis Overview

There are two ways of looking at the pair using the TA approach. All the moving averages from the 1 hour timeframe to 1 day timeframe point towards the down side. The bears have taken over at a pace which is unusual.

If you are on the buying side, then remember that the scene will be like catching a falling knife. While you might succeed in taking advantage of the price bouncing back from the lows, the chance of your hands getting bloody are undeniable.

So, position sizing becomes crucial. On the other hand, based on the weekly timeframe, the price is headed towards the support zones. Based on the rising amount of exports and the other events discussed above, a bounce from 1.200 looks like a promising trade.

However, do remember that if the situation gets any worse, then a stop hunt below the last flash crash dip will be the motive behind that. In the case of bullish movements then, 200 day SMA on the 2 hour and 4 hours will be the key level to watch.

Conclusion

The current markets exhibit a trading zone of over 400 pips. This is a wide range and requires carefully crafted risk management. So, if you have a big enough trading capital, then only go for swing trader otherwise it is much better to stick with scalping.

After all, it all comes down to personal preference and your style of trading. Remember, having a pre-calculated plan is a must to maintain long term consistency.

Do you have anything to say about the Pairs discussed in the article? Feel free to share your opinion by commenting below.