WHERE WILL THE STERLING GOES FROM HERE?

Since 24th June 2016, the cable has been heading south for over 3000 pips at all crosses, particularly for GBP/USD and GBP/JPY. It was earlier thought that 1.2795 would hold for quite sometimes but by 1st week of October, it was broken to as low as 1.1300 at some brokers platform due to the flash crash on 7th October 2016. As far as my broker is concern, the lowest recorded so far was at 1.2025 per US Dollar. Well, still it was a flash crash anyway.

If you read the news, analyst views as well as general sentiment from the price movement, it seems that it will probably go further south with some analysts predicting that it may even reach as low as 97 pence per dollar by end of this year. Wow, that would be 0.9700 then.

Is this possible? Definitely yes. The bottom has yet to be seen. With the current UK interest rate, Fed Reserve rate hike potential in December, US Presidential election to be ended by 8th November, no sign of soft brexit, no potential intervention to be taken by the BOE as well as other central banks to curb this fall out, it seems anything is possible in my honest view. At least that is what on the plate at this moment. We can assume that something may happen soon enough to support back the sterling, but that is more on assumption rather than reality.

The market is showing fear and the chart is showing that the bears are in full control with minor bull retracement these past 2 days. No serious sign of reversal just yet. I guess the British government probably don't care or this is perhaps something that has been orchestrated in order to boost the export for the UK. Definitely a cheaper pound is good for the exporters as well as for the tourism industry, but one way or another will have some adverse effect on the UK economy in general. I don't think I need further deliberation on this since it is written all over the news anyway.

As a currency trader, all we care is where it is heading in the coming weeks and months. Could the flash crash lows be a temporary bottom for now, or it probably go deeper into the sub 1.2000 territory? No one can really tell even the central banks. As far as my trading is concern, there is only one advise that seems to be applicable at this point of time - Proceed with Caution.

You can either stay with the bears or prepare to join the bull. Either way, you must always be prudent with your approach since there is no hard and fast rules here that can guarantee you certainties in any angle. I personally would like to swing the cable but the problem is, I have yet to see any strong signal that the sterling had hit the bottom.

Yes, anyone can put their guess and verdict, but the reality everything is at your own risk. Recalling what happened last week, as well as what happened to the EUR/USD back in 2008 when everyone was trying to pick its top (finally topped at 1.6038 on July 2008), it would have been crazy to do such thing. There is no need to do that after all.

Hence, for now I would just stick with the bandit strategy by scalping the market whenever possible. Looks like chicken but better than nothing though. At the same time, staying out would be the best option since market normally slows down towards the end of the year, even though still tradable.

Anyhow, after analyzing the monthly as well as the weekly chart closely, I would say that based on the RSI, Price Action and Fibo levels, sterling bulls may push it back to the north to as high as 1.2900 within these coming weeks, before the bears return and attack again. The bears probably tired after weeks of vicious attack and quite likely to take a break for a while.

Well, that is just my prediction without being biased to any position. Unless Theresa May says anything on the Hard Brexit again, the bulls will probably return and proceed with caution in giving the pound some glimmer of hope before end of this month. Otherwise, prepare for another fall out below the 1.2000 level. Pity the sterling but that is just my 2 cents.

Have A Nice Weekend!