Warning: Cable Wants A Real Correction
- December 19th, 2011
The USD rallied strongly last week across the board taking the $GBPUSD to a new low below 1.5420. After breaking down last week and making a new low at 1.5407, $GBPUSD has chopped around the 1.5500 major psychological level and large quarter point. With the pair unable to push lower, it is starting to give off warning signals to bears that the pair wants to correct much higher.
While the pair had already given us a correction to the 50% Fibonacci retracement level of the current leg lower. However, the new low required after this retracement has yet to materialize. This became a clear warning that price will start to push higher to actually correct the entire breakdown seen clearer in the chart below.
This chart reveals 2 more warning signals to bears. The first are the higher lows. The second are the candle closes above 1.5450. Even the new low at 1.5407 was only a spike low that closed above the key 1.5450 level. While the charts remain clearly bearish, be aware that a rally may actually be in the works off these spike lows below 1.5500. Look for a rally to target 1.5600, the larger 50% Fibonacci level of the entire breakdown. Given these thinner holiday, year-end market conditions, it wouldn’t be surprising to see a rally reach the 1.5650 level. From there, a daily candle close above or below that level will determine direction into the year end.
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Lydia Idem has been investing in equities for 16 years and trading currencies actively for 5 and a half years. Her trading style is simple and short term. With a special feel for sterling, Lydia trades almost exclusively the GBPUSD and EURGBP. You can follow Lydia on Twitter and StockTwits... (more)