Is Cable preparing for a reversal?
Some traders prefer to trade the trend, others look for reversals in order to get in early as the current trend tires. Here we take a look at one such opportunity for the GBP/USD after the excellent trend lower.
00:01
Introduction and webinar setup
00:01
The webinar host welcomes participants to the morning Forex webinar for the London session. They explain there was a brief delay due to technical difficulties with the GoToWebinar platform, which required restarting the setup. Despite the minor issue, the session is now running smoothly. The host also remarks on the rainy weather in Hampshire as the session begins.
00:31
Disclaimer and audience overview
00:31
The presenter begins by reminding viewers of the disclaimer about the risks involved in trading, emphasizing not to use money that cannot be afforded to lose. They acknowledge the presence of Forex students, users of quantum indicators, and new participants, addressing those who might be attending for the first time.
01:00
Volume price analysis explained
01:00
The session introduces the presenters Anna and her husband David, who analyze charts using volume price analysis, a technical method that examines price action and volume to determine the authenticity of price movements in the market.
01:31
Market sentiment and related markets
01:31
The discussion focuses on analyzing fundamental news alongside related market sentiment. Market sentiment is reflected not only in risky assets like equities and indices but also in currency movements, such as the buying or selling of the yen or the Australian dollar. Understanding these dynamics offers a significant advantage in navigating the market. The market is complex but not complicated, and currently shows divergences. The analysis tracks money flow into safe haven currencies like the Swiss franc, the US dollar, and the yen to gauge market direction.
02:40
Impact of China PMI on Aussie
02:40
The discussion focuses on the Australian dollar (Aussie) as both a safe haven and risk currency, highlighting its close connection to Chinese economic data. The recent July PMI release from China came in slightly above the 50 mark, indicating modest growth, although such data should be treated cautiously. Market reaction has been positive, reflected by increased buying of the Aussie overnight, as shown by a currency strength indicator designed to track market flows both on individual currencies and currency pairs.
03:52
Currency strength and flow indicators
03:52
The speaker explains the concept of currency flow, highlighting the importance of assessing whether a strong flow into a currency like the British Pound or Euro is consistent across all currency pairs. To analyze this, they developed tools such as the currency matrix, currency array, and a currency heat map, which tracks flows over multiple timeframes. The best understanding comes from seeing these tools in action.
04:24
London session and cable congestion
04:24
The speaker discusses the London trading session, highlighting it as a time when many traps are set for unwary traders. They focus on the GBP/USD currency pair (referred to as ‘cable’), which has been in a congestion phase since just before the European session started. Using a 5-minute chart, the pair shows sideways movement around the volume point of control, indicating a balance of supply and demand with strong resistance and support levels. Volume is analyzed both in terms of immediate activity and transacted volume over time, confirming the congestion. As the London session approaches, a break occurs characterized by volatility candles and increasing volume, signaling a downward move that is also reflected in related currency strength indicators and analysis tools.
06:12
Focus on cable and Brexit volatility
06:12
The speaker highlights the importance of volume support around the 120 to 120.65 level, focusing on the cable (British Pound vs US Dollar) currency pair for the upcoming month. They explain their interest in assessing potential volatility not just as sudden market shocks but as the likelihood of the currency delivering a reasonable trading range over days, weeks, or months. The discussion includes examining implied volatility data and other relevant metrics from investing.com to better understand the British Pound’s potential movements.
07:32
Volume point of control dynamics
07:32
The volume point of control has decreased following a downward move and entered a congestion phase before the London session, which is common before significant fundamental data releases. This indicator is dynamic, shifting locations as the market evolves. Currently, the market is in another congestion phase, and the key question is whether this will act as support for a reversal or if the downward trend will continue. Key levels relevant to this situation will also be analyzed.
08:08
Weekly key levels and price objectives
08:08
The speaker discusses weekly levels for the cable (British Pound) currency pair, focusing on session separators to analyze price movements. They highlight the importance of yesterday’s low, which lies just below the S3 level calculated by the Camarillo indicator, and note that these levels will be relevant for the rest of the week. Additionally, the speaker points out that support and resistance levels often align with round numbers, such as zeros and fives, a common characteristic in forex markets. They also mention using a ten-minute chart version for more detailed level calculations.
09:20
Combining VPA and fundamental news
09:20
The speaker explains that every 24 hours, new levels are provided, influenced by volume, price action, fundamental news, and political events. These factors combine to potentially create significant movements in the British Pound. They are currently waiting for the London market open to observe possible reversals, noting that a typical pattern involves a move before London opens, some congestion, and then a reversal that can often be a trap.
10:04
London traps and market behavior
10:04
The speaker discusses the behavior of traders during the London market session, noting that after a favorable move, traders often anticipate further gains. However, the market can abruptly pause or reverse before continuing in the direction of the main trend. The speaker refers to this potential scenario as the ‘classic London trap’ and suggests observing whether it will occur.
By Anna Coulling – creator of volume price analysis
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