More Losses More Likely For Cable

• faithmight
• March 25th, 2010

Many of you know that I was bullish on the $GBPUSD especially after the breakout above 1.5300 which was the 50% Fibonacci level on the weekly chart as illustrated below. The weekly chart has a strong 2nd bearish wave and a bounce from the 1.4780 low was expected and even warranted. But this breakout was a such a FAKE OUT that was confirmed as cable ended the week BELOW the 1.5300 level. Even with that confirmation, I still held on to a bullish bias until 1.5250 support gave way.

So from 1.5380, $GBPUSD fell 450 pips resuming the MT bearish trend with the start of what may be shaping up to be a 3rd bearish wave on the weekly chart. After the price breakdown to 1.4930 and the subsequent correction to 1.5110 (best seen on the daily chart below), the pair entered a day of consolidation producing the higher low at 1.4971 and then a lower high at 1.5051 in the very next session. After the release of the UK Budget Report, the $GBPUSD broke down making new lows at 1.4850 as UK Chancellor of the Exchequer Alistair Darling failed to give specific details on the UK government’s deficit reduction efforts.

Now what we have on the daily chart is a 2nd bearish trend wave. We have further confirmation thanks to the golden cross on the $USDX as reported by Ashraf Laidi (www.ashraflaidi.com). As Ashraf explained in a series of tweets, USD bullishness will likely see cable lower with an eventual challenge of ST support at 1.4780.

Keep your eye on news! Whether you are a technical or fundamental trader, geopolitical news and risk events has caused serious moves in the forex market this week in particular. Today, UK retail sales will be released. Just as the weak CBI hinted on Tuesday, expect weak retail numbers as the British consumer deals with high unemployment, a higher VAT tax, and the expectation of more higher taxes to address the federal debt. Later in NY, US Federal Reserve Chairman Ben Bernanke testifies to Congress. Bernanke is expected to be slightly hawkish as the US economy recovers more robustly than expected at this point. Due to the proximity of the speeches, Bernanke’s remarks will be contrasted with Darling’s cryptic (and ultimately dovish) remarks yesterday. This juxtaposition could fuel further losses in $GBPUSD.

Markets are on the move but cable lies at key support levels so be safe shorting at the lows. Trade what you see, not what I think!

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: GBPUSD

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