Markets

GBP/USD Trading Above Ichimoku Cloud: IDDA Strategy

Traders woke up to GBPUSD trading above the daily Ichimoku cloud on Thursday's Asian session. What could this mean for the future of the pair? To answer this, we need to take an IDDA approach before developing a GBPUSD trading strategy.

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1- Fundamental Points

UK side: After the the U.K. Supreme Court ruling on Tuesday, we saw a ton of volatility across the GBP crosses. However at the end, it looks like hope for a “softer” Brexit got rejuvenated. That explains why Mr. British Pound has been trading higher against his major forex dancing partners.

US side: President Trump pulled the US out of the TPP (Trans Pacific Partnership) on Monday. The TPP is a trade agreement among twelve Pacific Rim countries, but does not include China. It was signed in February 2016 in New Zealand after seven year of talks.

At this point nobody really knows what will happen if the US really withdraws from the pact. However, the TPP is weakened beyond recognition by the withdrawal of its largest member.

While Japanese Prime Minister Shinzo Abe has reportedly said that that the TPP without the United States would be “meaningless,” Australia has said they'll go through with it even if the US isn't there. This could give the global "super-power key" to China, which in turn, could weaken the USD.

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Coming up...

Coming up on the economic calendar on Thursday, we have yet another market-moving event out of the UK as they release their Q4 GDP at 9:30 AM GMT. Later during the New York session we have the US Unemployment Claims as well as their Advance Goods Trade Balance (DEC) at 1:30 PM GMT, followed by Leading Indicators (DEC) out at 3 PM GMT.

On Friday volatility could pick up during the New York session as the US releases their Advance GDP q/q at 1:30 PM GMT which is expected to have ticked down to 2.2% versus last quarter’s 3.5%. US Core Durable Goods Orders will also be out at the same time. Later at 3 PM GMT UoM Consumer Sentiment will be out to end the trading week.

2- Technical Points

The GBP/USD pair opened above the daily Ichimoku cloud on Thursday’s Asian session, moving towards the 23% Fibonacci retracement level at 1.2760. Support is set at 1.2115.

The pair may be on its way to form a Double Bottom chart pattern, with neckline also set at 23% Fibonacci.

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3- Market Sentiment

47% of traders are long in GBPUSD trading. Long positions are 5.7% lower than Tuesday and 7.1% below levels seen last week. Short positions are 17.3% higher than yesterday and 77.1% above levels seen last week. Open interest is 5.3% higher than yesterday and 30.9% above its monthly average. We use this market sentiment data as a contrarian indicator to price action, and the fact that the majority of traders are short gives signal that the GBPUSD may continue higher. The trading crowd has flipped from net-long to net-short from yesterday and last week. The combination of current sentiment and recent changes gives a further bullish trading bias.

GBPUSD Trading Strategy

Calculate your risk tolerance and use the levels mentioned below to create a strategy suitable for you. For further help, please visit our investing group.

Here are Invest Diva's calculations for important approximate levels for GBP/USD to keep an eye on:

Support Levels Turning Point Resistance Levels
1.2115 1.25 1.3170
1.15 1.2760 1.3480

This article was originally published on InvestDiva.com.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Kiana Danial

Kiana Danial is an award-winning, internationally recognized personal investing and wealth management expert. She is a highly sought-after professional speaker, author and executive coach who delivers inspirational workshops and seminars to corporations, universities and entrepreneurial groups. She is a frequent expert on many TV and radio stations and has reported on the financial markets directly from the floor of NYSE and Nasdaq. She is a weekly investment expert guest on Tokyo’s #1 Investment TV Show. She has been featured in The Wall Street Journal, TIME Magazine, CNN, Forbes, The Street, and numerous other publications. Kiana’s book "Invest Diva's Guide to Making Money in Forex" was picked by McGraw-Hill only two years after she first moved to the US, and was an immediate domestic and international success. At a young age, she has won numerous awards including Best Financial Education Provider at Shanghai Forex Expo in 2014, New York Business Women of Influence Honoree in 2015, and Pro Bono Humanitarian Award by IA Bar Association in 2013. Born and raised in Iran to a Jewish family as a religious minority, she was awarded a scholarship from the Japanese government to study Electrical Engineering in Japan, where she obtained two degrees in Electrical Engineering and researched on Quantum Physics in classes conducted in the Japanese language. Being the only girl and foreigner in her classes made her decide to dedicate her life to empowering minorities, especially women in male dominated industries. As the CEO of Invest Diva, Kiana’s goal is to empower and educate women to grow their wealth by investing like a ROCK STAR.

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