Good morning everyone, and I hope you all had a great weekend. I spent the time on a course to develop a deeper understanding of the psychology of trading. This will form the basis of another web site ( all free information as always ) which I hope will help you better understand the emotions involved in trading and how to control them.
I am now going to get on to one of my favourite hobby horses!! ( yes another one ). As you will have seen, the GBP USD has pulled back in the last few days from the highs of 2.06 and is now trading around 2.03. The so-called experts are now calling the top, and the market sentiment is now bearish – WHY??? – what has changed since last week. If you are a fundamental trader, have there been any siginifcant changes in the underlying fundamentals – answer NO – interest rates have not changed, the underlying US and UK economies remain essentially as they were the week before – have there been any statements in Europe, US or UK from anyone significant – NO!! The general muttering concerns the problems in the sub-prime market!! – as if this has anything to do with any market, forex or otherwise.
For the technical traders, the only signal we have had so far is on the weekly charts with a bearish engulfing signal based on last weeks fall in the pair. Whether this constiutes a long term reversal or merely a pullback before prices continue upwards, is far to early to say. In my view, a long term reversal will have only begun once the pair have penetrated the old tops at the 1.9500 level. In my view we are merely seeming some profit taking afte the last few weeks, before the pair continue upwards again. At some point in the 2.03 – 2.11 range they will peak and turn, and my view is that this will only occur once there is a major shift in fundamental economics, or rates, or both.