Forex Technical Analysis GBPUSD 2014-09-18

Good day, dear traders. Today the Scotland independence referendum will be held, which may lead to the formation of a new state on the territory of the EU. The voting will last till 23:00 (CET) and the outcome is not certain yet. The final results will be announced on Friday between 07:30 and 8:30 (CET). The results of the survey by YouGov, a British public polling service, conducted on 7 and 12 September with a 5 day interval, indicated an unsettled public opinion. Thus, while on September 7 51% of respondents answered they would vote for independence, on 12 September the ratio changed – only 48% would vote for independence. Taking into account the statistical margin of error, which is no less than 1 %, the vote outcome is not clear. We expect that the results of the referendum will affect the Forex market, especially the British pound. Let us remind that the Scotland GDP accounts for 9.2% of the GDP of the United Kingdom and amounts to 186 billion Euros annually. Therefore the separation may have a significant negative impact on investors’ attitude toward British pound.

Let us consider the 4 hour price chart of the currency pair GBP/USD. The price is moving within the rising channel H4, which is confirmed by the RSI-Bars oscillator. There are no contradictions with the Parabolic and Donchian Channel trend indicators either. Unfortunately, the price line runs into the natural obstacle in the form of a bearish resistance line. In order for the ratio of profit to risk (the rentability) to exceed 100%, it is recommended to open a long position only after the daily resistance level of 1.64372 is breached. If this happens, we will stay within the weekly rising trend and will wait for the formation of a new model on H4 chart. The risks can be limited by the level 1.62204, which lies below the last fractal support and historical reading of the Parabolic SAR indicator.

In case a strong daily resistance turns out to be steady, we expect a trend reversal into the red zone. The change in signals for both trend indicators is possible if a breach of the resistance line at 1.62204 happens. In this case the conservative traders should wait for confirmation by oscillator to record the breach at the 48.03% level. When setting the position the risks can be limited by the fractal resistance at the 1.63576 level, which is confirmed by the upper Donchian Channel. We place both pending orders simultaneously. It doesn’t pay to pressure the market – it will make its own decision. After opening the position we move the stop to the zone of next fractal minimum (long position) following the Parabolic indicator, or to the zone of fractal maximum (short position). It is sufficient to do daily resetting after the formation of 5 new 4-hour candles, which are necessary for the formation of Bill Williams’ fractal. Thus we change the possible profit/loss ratio in the direction of no loss state.