The highly political pound clocked a new low of 1.1987 in London, extending the low seen in early Asia 7 pips. This move essentially validates the drop as price action during early Asia occurs is a notoriously thin time for sterling. Cable is now trading at the lowest levels since the flash crash of October 7 where it briefly touched 1.1491. The dive in the pound follows reports that UK PM May is preparing to use a scheduled speech tomorrow to declare that the UK will be opting for a so-called hard Brexit. This has gone down well in the UK equity market, propelling the FTSE 100 to a new record high. News that Trump intends to fast track a trade deal with the UK is an added positive for stocks, as it will strengthen the UK’s hand going into negotiations with the EU, though the pound is expressing a less-optimistic view. If May confirms that the UK will be opting to walk away from free access to the single market, the focus will be how quickly and under what terms the UK will re-establish a new trading deal with the EU and the 60 other economies that the EU has a trade deal in place. The worry is that there will be a multiyear delay between leaving the EU and establishing new trade deals.
The opening move this week has helped the January 9 GBPUSD short position through to target 2 at 1.2000 for a net gain of 180 pips.
As well as pound weakness the week has also started with JPY strength and two JPY positions have also achieved key targets. Both trades have been active from December 21. The GBPJPY short position hit target 1 within a week on December 28 and achieved target 2 last Thursday (January 12) as the key psychological level of 140.00 was breached and then broken significantly. Total net gain 550 pips in 15 trading days.
Also today the EURJPY short position from December 21, that for so long had been out of the money and trading sideways, hit target 1. This is on the back of the positive sentiment surrounding the JPY and the negativity surrounding the GBP rubbing off on its near neighbour the EUR. This achieved a 165 pip gain in a little over two trading weeks with target 2 at the 38.2 Fibonacci level now in sight at 119.50.
Three trades with a total net gain of 895 pips. Although Forex trading can be fast and furious, as with any trading, discipline and patience are key attributes for success.
/ has had a good start to 2017 with all four January trades achieving target 1 and three trades hitting target 2 for a total net gain of 716 pips. Join me at the webinar tomorrow to see how RSI helps with my analysis.
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