Pound Long Position Begins To Develop – August 3rd 2015
We have some interesting shifts occurring in the COT Data over the last week. Last week showed a large push towards the buy side on the pound. Its important to remember this is buying or selling of just the Pound as an individual currency. Therefore it is not always a direct correlation to pairs such as the GBP/USD or the GBP/JPY. In currency trading, the buying or selling that is occurring on the other currency in the pair is equally as important. With that being said the move toward Pound strength was quite aggressive and was one of the largest decreases in the overall net short position that has been held on the Pound. As of now the Pound is rapidly approaching net positive territory after having close to a year in net negative territory among smart money.
What does that mean for you in your trading this week. Like I mentioned before, COT data is in no way shape or form a reason to place a position. It is however a reason to potential hold certain direction trades longer. You could also argue for being more aggressive to the long side in support of this recent Pound strength. Like I mentioned today in the video review for members, COT data is like market cycle….it is just a filter and we still need to see a stop run of a valid manipulation point to actually take the trade.
Euro Nearing Decision Point
The Euro is really getting compressed on a daily chart. If you move out to the daily chart on the Euro you can see how the top line has been falling. This is creating people often call a descending triangle. I hate to use that term because that is really not the important part but it is the best way to visually explain what I’m seeing. The reason I do value that is because compression of price often leads to the next big break. Another key is it compresses orders. I did a great training video titled Forex Chart Pattern Analysis that I would recommend checking out if you get a chance. For today I will be keeping direction open on the EUR/USD and therefore I will be trading either direction from any of the listed manipulation points.
The Euro gave an absolutely beautiful stop run of an upper manipulation point on Friday and produce a beautiful short setup resulting in a full 4% take profit. Because that stop run was so huge at the highs during the NY session it actually took out two upper manipulation points as well as breaking through the psychological barrier of 1.1100 before confirming down. After the confirmation down it gave the pullback that we look for to provide an entry closer to the highs which allows for a tighter stop. The reason the tighter stop are so critical is because they produce beautiful high reward to risk ratio trade setups which is the most important key to trading forex successfully over the long term IMO. As always if your a member make sure to watch today’s video daily market review for a full breakdown of that trade setup. For everyone else I hope to get out the July trade recap video this week sometime. If you did not watch the May trade recap or the June trade recap I would highly recommend doing so!
GBP/USD Continues Testing Major Upper Level
The Pound is in an interesting situation at present. As I mentioned in the intro the Pound has shown some major reduction in the overall net short position that has been held for close to a year. From a technical stand point the 1.5670 area has been a major line in the sand as of late. This area is for me a major line in the sand. Should the market break and hold above that level, it is likely to signal a larger move to the upside. As long as that level holds I will be looking to simply trade both direction from any of the pre-selected manipulation points. One interesting point is the direction of all the Pound data we are expected to see this week. Manufacturing PMI, Construction PMI, as well as the MPC meeting are all expected to be bullish with only one piece of data expected to be lower than the previous month. With that in mind I do favor a move up from a valid manipulation point.
Forex News For August 3rd 2015
UK Manufacturing PMI 4:30 AM Eastern: This has been an awesome release over the last 3 months. Its really nice to see news coming back into focus for the first time in literally years. Its exciting for me because my first success in this market was as a news trader. Over the last 3 months any deviation over a full 1 point should see not only a large spike but also some great follow through in the direction of the trade. Especially if the news comes out better than expected, any longer within 20 pips of the pre-release price should do very well. Its important to note that this is in reference to the original move. If the market makes the move and pulls back into the level hours later it doesn’t mean you just jump in. This month is expected at 51.6
US ISM Manufacturing PMI 10:00 AM Eastern: This news has been all over the place over the last few months. We have seen the market use this news as a catalyst for the next move and then we have seen the market use this news to create a stop run and then reverse the price. Tomorrow the big point for me is I won’t be carrying a trade into this news as it has the ability to spike the market more than 15 pips. ISM is expected at 53.5 which is the same as last month.
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