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British Pound Taking One Hit After Another

Good day fellow traders! Today is a holiday in the USA, and I wasn’t expecting to see much movement in the markets. While most currency pairs posted small daily candles today, the GBP/USD and other Pound pairs produced considerable gaps over the weekend.

GBP/JPY – The Downward Spiral Continues

I wrote about this pair over the weekend and warned about the likelihood of a further decline in the exchange rate. I also wrote about looking for a price retracement to enter short on this pair. Unfortunately, the first opportunity to enter this pair was a staggering 230 pips below Friday’s closing price. This is how weekend market gaps can shuffle around our plans sometimes. If you were holding short exposure on this pair over the weekend, well done! You had a pleasant surprise as you looked at your trades this morning. Let’s have a look at a daily chart of the GBP/JPY:

GBP/JPY Daily Chart

Here you can see this massive gap lower. The cause if this great Pound weakness is the market’s fear of a “hard Brexit”. Tomorrow (Tuesday) the markets will anxiously listen to the UK Prime Minister Theresa May’s speech for more details concerning the severity of this Brexit ordeal, and how exactly she will put it into motion.

At the moment the Pound’s circumstances look really poor, and I expect this currency to weaken against most other currencies over the next few days, and even weeks. Just be careful of some kind of wild card which could emerge from Theresa May’s speech tomorrow. You never know what will happen in the FX market, neither do you want to get caught up on the wrong side of a powerful short squeeze. We should never be off guard in this game!

GBP/USD – Will We See a New Millennial Low Soon?

I’m just kidding about the ‘new millennial low’ – that’s taking it a bit too far. Nevertheless, the Pound has really been treading water during the last three years and has lost considerable value against the US Dollar. The picture I get of the Pound is that of a vehicle stuck in the mud. The more the wheels spin, the deeper it digs into the mud. I have been stuck in the mud like this numerous times here in South Africa.

Here is a daily chart of the GBP/USD:

GBP/USD Daily Chart

I don’t have a lot of hope for the Pound at this stage. I would like to say you should wait for a retracement entry on this pair, but perhaps there will be no pullback, or perhaps only a very weak pullback. Much of this pair’s near-term price action will probably depend on what Theresa May says tomorrow at 11:45 GMT.

Don’t forget about the release of the UK CPI numbers tomorrow at 09:30 GMT. These are important numbers to keep an eye on. Just be careful about trading into these numbers too much, as Theresa May’s speech will carry much more importance than these figures.

AUD/USD – Sitting at a Key Juncture

Lastly, let’s have a quick look at the Aussie:

AUD/USD Daily Chart

This pair has traded up into an important resistance zone. The black moving line is the 200-day moving average. As you can see, this pair has already encountered some resistance here, as the bulls cover their long positions, and other market players engage in short positions.

The red ellipse on this chart marks an important zone of decision making in this exchange rate. This might be a tough hurdle to clear for the AUD/USD.

I’m not saying you should short this pair right now, but be aware that we are trading at an important resistance zone.

If you have an appetite for trading other markets like commodities and stock indices, stay tuned because we still have a lot to talk about this week. We didn’t see anything meaningful happen to these instruments on this quiet day in the markets, but there will surely be something we can look at in the days to come.

I can’t wait for tomorrow – we have a normal trading day without the sluggishness of a holiday in one of the major global financial centers like we had in the USA today. I expect a volatile day in the markets, especially in the Pound pairs.

Have a great day, traders! And as always, good luck with your trading!

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Eric Furstenberg
Lead Educator
Eric Furstenberg is a successful entrepreneur and fund manager with years of trading experience in the Forex, commodity, and stock index markets. He is a seasoned trader who employs advanced trading methods to complement his portfolio and also manages a private investment fund.
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