February 16, 2012
Tightly Packed EMAs Could Signal The Start Of A Big Move For GBP/USD Pair
The GBP/USD pair has been very hard to trade this year (as indeed have so many other pairs) because it hasn't really gone anywhere. However looking at the daily chart, it looks like a big move could be coming up very soon.
This is because the price is currently very close to the 200 day EMA, and this EMA has been moving sideways for the last few weeks. Furthermore the 5, 20 and 50 day EMAs are also tightly bunched up and close to this long term moving average.
Whenever this happens, we usually see a big trend emerge and the price will often start to head strongly upwards or downwards in the following weeks and months (away from all of these EMAs). So this could be about to happen here.
Once this trend starts to emerge, it is fairly easy to profit from this new trend. However anticipating the trend in advance is a lot harder, which is why it is often better to wait for confirmation of a new trend.
The Supertrend indicator is currently red on the weekly and monthly charts, so the GBP/USD is still in a long term downward trend. However the MACD and Smoothed Repulse indicators are starting to turn upwards on these time frames. So it really is hard to predict which way this pair is going to go, that's assuming that we do end up seeing a big trend emerge.
I really do hope we see a new trend start to form on the daily chart because it is tough going out there at the moment. This pair, along with many of the other major pairs, are extremely difficult to trade right now.
The Average True Range for the GBP/USD pair is currently under 100 points. In other words this pair trades within a trading range of less than 100 points per day on average. So we badly need some strong moves one way or the other.
The USD/JPY has managed to pick up a little bit just recently, and has actually moved upwards through the EMA (200) on the daily chart, but market conditions generally are still not ideal. That's why I haven't been placing as many trades as I used to.