GBPUSD bulls remain in charge
The bulls are in control of this pair, and gained more strength yesterday by pushing prices through .618 Ret (May-June decline) to an eight-week high at 1.8767, the highest price gains since July 06’06.
The Cable hit a peak (1.9552) in Dec’04, the highest price since Sept’92.It later made two failed attempts to retest that level in March/April’05 and subsequently declined sharply from there to 1.7272 low in July’05 which was followed with a two-month rally towards 1.8500/03 levels culminating in another sell off which bottomed out at 1.7047 in Nov’05.The pair consolidated for the next four months and broke out in April’06 from a triangle pattern with a price objective of about 1.8721 which was later achieved and surpassed after about four weeks rally taking it to as high as 1.9024.GBP has since retraced 50% of that rally and has been consolidating until its recent breakout last month (July 21’06)
Figure 1: Daily Chart
Figure 2: Daily Chart
After breaking out to the upside the previous week pushing through its horizontal trendline and falling trendline originating in May, the pair sold off into its range on Monday and Tuesday last week and closed higher three days later to bring the week to a close at 1.8628 on Friday. Cable followed through this week with higher gains on Monday and Tuesday suggesting that a retest of its May high is around the corner. In addition, GBP is currently trading above all major moving averages, adding to the overall bullish view. Although a look at the momentum indicator on the weekly chart suggests that more upside is expected, the stochastic indicator on the daily chart is overbought at the time the pair is testing a new high, an indication that price might correct or pullback. On a pullback, the .618 level just broken should hold as support but a violation of this level might take the pair to the confluence of .50 Ret/horizontal trendline at 1.8552/45 zone which should provide a firm support for this pair.
Figure 3: Weekly Chart
On the whole, holding above the mentioned confluence of support puts GBP in position to recover fast and push higher towards its May high.
Happy Trading
Mohammed Isah is a private trader and an independent technical analyst. He initially traded stocks and now primarily focuses on forex. He produces Weekly, Mid-Week and Friday forex technical research which is available at
www.tradingmarkets.com/fxtechnicalresearch. He also has a Daily, Weekly and Monthly pivot points reports. You can contact Mohammed on his pivot points reports and other enquiries at:
isahmo@gmail.com