The GBPUSD corrected higher in NY trading after the gap move lower, but did find sellers as the price approached the 38.2% retracement level at the 1.6192 area (the high reached 1.6183) and the underside of the broken trend line (see PRIOR POST HERE) . The bears remain in control. The fears from Scotland declaring independence remains the focus.
Technical Analysis: The GBPUSD has stayed below the resistance at the 38.2% and trend line.
The technical – like the 38.2%, the trend line are a way to control market risk – or the risk faced everyday when the price moved higher and lower. The Scotland vote is event risk. Event risk can be scheduled or not scheduled. If there is a poll that will be released at a specific time, that is scheduled. A poll that comes out at a random time, is unscheduled.
Event risk is not limited to the Scotland vote in the GBP. It is big and may trump other things but it is not the only ingredient that goes in the fundamental cauldron. Between now and tomorrow at this time the UK Trade Balance will be releaased, Industrial and Manufacturing Production and NIESR GDP estimate will be released. In addition, BOE Carney will be speaking in Liverpool at 4:30 AM ET/8:30 AM GMT). These “events” increase overall risk in the market and could solicit a market reaction counter to the current trend.
TRADING TIP: Do you feel comfortable with your market and event risk? That is up to you. If fear is too great, get out or at the least lighten the position. There will always be another trade. If you want to keep your position, accept the risk. Understand the risk from all the events. I encourage traders to only risk 1-3% of equity on a trade. Risking more is creating a bad habit and potentially lead to a more significant hit to equity if a string of losses are realized.
Of course the data and speech are not until 4:30 AM ET/8:30 AM GMT so there is time to lighten up positions, but it is important to be aware and be prepared.
