Hi There
I have been busy ready and learning from your work – thanks. I am always then keen to try and interpret the Forex pairs based on the new learning.
At a time where ‘everyone’ is predicting the demise of the GBP following Bexit, the left of the attached chart provides plenty of evidence of huge amounts of retail traders and abundance of sell side trades from retailers.
I was just wondering if the attached is a reasonable assessment about what maybe ocuring in the GBPUSD.
It seems to me a significant reversal maybe underway.
Am I reading this in a reaonsable way – your thoughts are welcome?
Thanks
Regards,
Response:
Your analysis aligns pretty well with mine.
However, I don’t see a complete reversal happening…
Instead, I anticipate a sizable retracement, possibly back up to the 1.2730 level within the consolidation zone. Given the current downtrend, a multitude of retail traders are likely to enter short trades on any visible down-move.
If the banks intend to push the market further down, they’ll have to instigate a consolidation or retracement. This will tempt traders to flood the market with buy orders, providing the fuel for the next downswing in this downtrend.
The more buy orders there are, the more significant the next downward swing will be.
The previous downswing from the 1.3000 level, which was preceded by a prolonged consolidation, implies the upcoming downswing is more likely to follow a retracement of some kind… this would entice more traders to place buy trades than another consolidation.
In response to your previous email: a sell zone is essentially a supply zone the market has touched more than once, and similarly, a buy zone is a demand zone which has also been touched multiple times.
Not all supply or demand zones which have been hit more than once are categorized as buy zones or sell zones.
The classification largely depends on their formation in the market.
Most rally-base-rally/drop-base-drop supply and demand zones do not transform into buy zones and sell zones when the market strikes them a second time. It’s usually rally-base-drop/drop-base-rally zones that wind up becoming buy zones and sell zones.
Have a great day!
PAN.