Cable Drops, Now What?

• faithmight
• November 17th, 2011

After waiting for 2 weeks of range consolidation, I wrote to expect cable to move higher. And we got that move higher when the market opened this week only to see price exhaust ahead of 1.6100 and produce the breakdown to 1.5750 we had been waiting on the past 2 weeks.

Now what? The most interesting timeframe is the weekly chart which seems to signal that $GBPUSD may have more bullish potential.

The break above the 61.8% Fibonacci retracement levels with candle closes above the level is bullish despite the recent slide. Coupled with a weekly close above the 100-wk simple moving average and cable begins to take a bullish bias even as the USD enjoys safe (away from Europe) haven flows.

1.5600 remains key for cable this week and possibly into next. I see the USD pushing $GBPUSD into the 1.5650 level this week. However USD strength becomes for real with a break below 1.5500. Equities would have to cooperate, I think, in order for $GBPUSD to become truly bearish again. However, from the stock traders on my stream, that seems unlikely medium term, giving cable bulls more reason to set up into 1.5650 and even 1.5600.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

Tickers: FXB, GBPUSD

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