Don’t catch a falling knife. Don’t get in the way of a freight train. Both are phrases that come to mind when describing what we are seeing in the GBPUSD today.
Other sayings I like to say is “Trends are fast, directional and tend to go farther than you expect” and “Deja vu all over again”
From the December 31 closing level, the GBPUSD now has a change of around 260 pips. That trend decline is the largest since May 6th 2010. On that day, according to Bloomberg:
The pound fell below $1.50 for the first time since March 30 as Britons voted in an election that’s expected to produce a Parliament where no party has a majority. Sterling slid 0.8 percent to $1.4979 from $1.5102 yesterday, a fifth straight decline.
There will be a new election in the UK in 2015 but not until May 7, 2015. So perhaps the market is getting an early start on the uncertainty from what is being billed by PM Cameron as “the most important election for a generation”. Deja vu?
The last time the GBPUSD fell as much as today was on May 6, 2010
The price is not quite to the 1.5000 level- like it was in 2010-but at 1.5326 low, it is getting closer. Looking back, just 6 months ago the GBPUSD was moving toward the years high at 1.71898. Nearly 1900 pips later, we are at 1.5330. Trends are fast, directional and tend to go farther than you expect.
Another deja vu moment, goes back to January 2, 2013. On that first trading day of 2013, the price of the GBPUSD traded at a high price in the first few hour of trading at 1.6389. That high price was not surpassed until 11 months later on December 2nd. The fall from the level took the pair from 1.6389. to a low on March 12th at 1.4830 and later to 1.4812 before the rally started (see chart below).
The high on January 2, 2013 was not traded again until 11 months later.
With today’s high for the first day of the year coming in the first few hours of trading once again, one has to wonder with huge trend break lower, how long will it take to get back to the end of year closing level at 1.5586? Are the buyers caught once again by the January 2 sell off?
With the price at 1.5330 area currently, and not a buyer to be found in today’s trend move lower, that level seems far, far away. Have a good weekend.
1st trading day of the year brings a huge trend move lower.