Medium term
Trade view / 05 August 2016 at 7:54 GMT

Dealing with a falling GBPUSD

Trader / Saxo Capital Markets Pte Ltd
Instrument: GBPUSD
Price target:
Market price:

This week the Bank of England cut the official bank rate to 25 basis points, and announced a resumption of its asset purchase program. The Bank of England also left the door open to doing more.  Many expect another rate cut to bring rates closer to zero. In terms of market reaction GBPUSD has slumped two cents in the wake of the Bank of England's announcement (see our Morning Report APAC for details).

Technically speaking, we see the following technical setups:
1. Rising wedge in a downtrend (GBPUSD bearish)
2. Slow Stochastics (9,5,5) having a bearish crossover (GBPUSD bearish)
3. MACD (34,5,5) about to have a bearish crossover (GBPUSD bearish)

GBPUSD daily chart (click to enlarge)


Source: Saxo Bank. Create your own charts with Saxo Trader click here to learn more

We should buy when the stock/currency is rising, and sell when the stock/currency is falling. Post Brexit, we remain mid-term bearish on GBPUSD.

In addition, the Non-Farm Payrolls (NFP) in the US tonight provides an element of event risk into this trade idea (read here a preview by Juhani Huopainen). However, our analysis indicates that the Automatic Data Processing (ADP) NFP, usually released 2 days ahead of the government NFP, has so far this year correctly predicted the NFP surprise 6 out of 7 times:


This week’s Wednesday, the ADP NFP beat it’s forecast, and if history were to repeat itself we should see the NFP beat its forecast (+180,000 jobs) tonight. Should this happen, we expect the USD to bounce and GBP selling to accelerate.

Management and risk description
We can commence the GBPUSD sell at the break of the rising wedge (~1.3080). In addition, we can minimize the risk of the trade through an entry stop order.


Entry:  Sell GBPUSD via a entry stop order at 1.3080, GTC

Stop: We base our stop on 2 x ATR, i.e. 1.3080 + 2(0.0131) = 1.3342

Target:  When the Slow Stochastics next exhibit a bullish crossover, indicating that downside momentum has eased.

Monthly GBPUSD 5-year-chart (click to enlarge)

GBPUSD 5-year-chart

Source: Saxo Bank

Non-independent investment research disclaimer applies. Read more

— Edited by Clemens Bomsdorf


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer
- 沪ICP备13028953号-1

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail