Technical Sentiment: Bearish
Key Takeaways
Cable ended a week long consolidation, triggered by a temporary double bottom pattern on intraday charts. With the downtrend back to full throttle and a heavy week on the fundamental front, we expect to see some increased volatility for the rest of the week.
Technical Analysis
On Wednesday 27th August, when price failed to form a Lower Low, shaping a double bottom at 1.6534 instead, cable reached a temporary equilibrium as selling pressure began to dissipate. Despite extreme oversold conditions, as indicated by Stochastic on the Daily chart and from the lack of meaningful corrections within the downtrend, buyers were helpless when faced with a string of economic releases from U.S., all with bullish expectations.
GBP/USD bounced off the 200-Day Exponential Moving Average, currently priced at 1.6633, capping this correction before it could test a more meaningful resistance cluster (1.6700).
Free Reports:
Traders are searching for a fresh Lower Low. GBP/USD sold off as low as 1.6490 on strong U.S. data; however price is currently back flirting with the large psychological handle 1.6500. Immediate support rests at 1.6471, representing a price pivot zone formed between November 2013 and March of this year. If 1.6471 fails to offer support in the coming sessions, the current downtrend will likely extend as low as 1.6255/80 (38.2% Fibonacci retracement from 1.48 up to 1.72, coupled with a monthly pivot zone).
The preferred strategy is to sell rallies, unless a bullish price action signal pops up on the daily chart, preferably starting from one of the support levels mentioned in this analysis.
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Prepared by Alex Z., Chief Currency Strategist at Capital Trust Markets
