Gbp/Usd Weekly Technical Commentary

[scalperfx]

Chart Levels:

Support 1.9800..1.9677..1.9590..1.9465.
Resistance 1.9900..2.0000..2.0134..2.0200.

This week: ↗
This month: ↗

Helped higher by a fat Ichimoku 'cloud' and we are currently testing the top of the 'flag' formation. If not today then this week we favour a re-test of 2.0000. Over the next three to six months we favour a series of random swings either side of 2.0000. At the moment we are pencilling in 5 cents either side of the central point. This should keep at-the-money implied volatility above 5.00% (two standard deviations from the mean of the last decade), and probably below 8.00% (most of the time). Note that sterling has lagged well behind this year's best performers, the Brazilian real, Canadian and Australian dollars, the Norwegian krone and New Zealand dollar in that order.

[scalperfx]

After last weeks outside bar this weeks price action formed an inside bar with price testing the 1.9900 resistance on Tuesday. 1.9750 proved its importance once again this week price bouncing of it twice on Wednesday and Thursday only to get very close to Sunday night opening quote in late Friday session. With those two levels in mind (the 1.9900 resistance and 1.9750 support) we will look forward to see where the pair might be headed in the next couple of days. A break above the 1.9900 level will open up the 2.00 round number as a bullish target and if price gets that high we might witness another push north toward the YTD high of 2.0133. Conversely if sterling loses its short term momentum the pair might slip lower than the 1.9750 level getting more close to May 21st high at 1.9670 and if this support zone doesn't hold we have to look at the .50 Fib of the December-April trading range for more support. As always we will continue to analyze price action in the following week to see if things clear up direction wise.

Resistance Levels

* 2.0200 - Round number
* 2.0133 - April 18th High
* 1.9840/70 - May 4th / December 1st 2006 High

Support Levels

* 1.9750/60 - retested level, May 11th low
* 1.9700 - May 18th Low
* 1.9670 - February 27th High
* 1.9550 - .50 Fib

[scalperfx]

Cable was relatively more resilient comparing to other majors but after all, no progress was made last week and cable ended the week almost flat too. From a short term angle, another dip could still be seen as long as 1.9831 resistance holds. But still, since corrective fall from 2.0132 could have completed at 1.9676 already, it will take a break of 1.9716 support to suggest that fall from 2.0132 is still in progress. Otherwise, the rebound from 1.9676 is still in favor to resume upon completion of the fall from 1.9899. Break of 1.9831 will encourage a retest of 1.9899 resistance and then short term falling trend line (now at 1.9927). On the downside, below 1.9716 will encourage deeper decline towards medium term rising channel support (now at 1.9615) and then 1.9545 cluster support (61.8% retracement of 1.9183 to 2.0132 at 1.9546).

In the bigger picture, risk of medium term reversal remains high.. Firstly, the whole up trend from 1.7047 is not clearly impulsive. One interpretation is that rally from 1.7047 ended with three waves up to 1.9024. Subsequent correction ended at 1.8090. Rally from 1.8090 has already met mentioned target of 100% projection of 1.7047 to 1.9024 from 1.8090 at 2.0067. Secondly, regardless of the larger trend, rise from 1.8090 can be interpreted as being a five wave sequence with first wave ended at 1.9142, second at 1.8517, third at 1.9913 and fourth at 1.9183. The channeling property supports this interpretation too. In such case, the fifth wave rally from 1.9183 has also met target of 61.8% projection of 1.8517 to 1.9913 from 1.9183 at 2.0046 too. With bearish divergence condition remains in weekly MACD and RSI, as well as Daily MACD and key 2.0106 resistance (92 high) not decisively taken out, 2.0132 could be the important medium term top already.

On the downside, firm break of the medium term rising channel support (now at 1.9615) will indicate that the whole rally from 1.8090 has completed and add much credence to the case that an important medium term top is already formed and put focus to 1.9183 low. However, sustained trading above mentioned 2.0106 resistance will dampen the above interpretation and indicates that underlying bullishness in cable is much stronger then we thought. Further medium term rally should then be seen towards 61.8% projection of 1.3680 (01 low) to 1.9554 (05 high) from 1.7047 (05 low) at 2.0677.

In the longer term picture, previous break above 1.9554 resistance (04 high) is favoring the case that long term up trend from 1.3680 has resumed after correction from 1.9554 was supported by 55 months EMA. However the structure of the medium term rise from 1.7047 is not clearly supporting this yet. And, we're still skeptical on it. The structure of the fall after finishing the current up trend from 1.7047 should reveal more information. But a strong break of mentioned 2.0106 resistance indicate add much favor to the case that multi year up trend from 1.3680 has resumed and hence should bring rally to next target of 61.8% projection first.

[scalperfx]

UK

a big week for inflation numbers in the UK, with PPI, CPI and average earnings all due. Any strength or weakness will have a significant bearing on general money market sentiment. Recent manufacturing surveys have pointed to rising expectations for output prices, but the latest core PPI output number was weaker than expected. Average earnings have been generally well behaved, while May will be an important month for CPI. It was May last year when food prices first started to rise (up 1.5% m/m last May), while utility bills also rose sharply. The base effects for the y/y calculation are therefore potentially quite negative, especially as electricity and natural gas charges should have fallen between April and May. A key issue will be what happens to food prices and more generally whether the �base effect� is offset by strength in other CPI categories. The MPC is expecting CPI to fall in the shortterm and the outcome of the May data will have a bearing on sentiment about how far this will develop in the months ahead. Retail sales and the RICS house price survey will be watched for indications about whether tighter policy is having any impact, while the monthly trade data is also due.

[scalperfx]

Despite extending the rebound to as high as 1.9968, cable failed to take out 1.9956/58 cluster resistance (61.8% retracement of 2.0132 to 1.9676 at 1.9958 and 100% projection of 1.9676 to 1.9899 from 1.9733 at 1.9956) and reversed sharply to as low as 1.9621, taking out prior low of 1.9676. As discussed before, the three wave structure of the rebound from 1.9676 and meeting of 100% projection target indicate that such rebound from 1.9676 is of corrective nature and in other words, whole decline from 2.0132 is still in progress. From a short term angle, such fall is expected to continue as long as 1.9968 resistance holds. More importantly, cable is now pressing the medium term rising channel support (now at 1.9621) which is important to determine whether the rally from 1.8090 has already completed and an important medium term is formed at 2.0132.

Recapping previous discussion, firstly, the whole up trend from 1.7047 is not clearly impulsive. One interpretation is that rally from 1.7047 ended with three waves up to 1.9024. Subsequent correction ended at 1.8090. Rally from 1.8090 has already met mentioned target of 100% projection of 1.7047 to 1.9024 from 1.8090 at 2.0067. Secondly, regardless of the larger trend, rise from 1.8090 can be interpreted as being a five wave sequence with first wave ended at 1.9142, second at 1.8517, third at 1.9913 and fourth at 1.9183. The channeling property supports this interpretation too. In such case, the fifth wave rally from 1.9183 has also met target of 61.8% projection of 1.8517 to 1.9913 from 1.9183 at 2.0046 too. With bearish divergence condition remains in weekly MACD and RSI, as well as daily MACD and key 2.0106 resistance (92 high) not decisively taken out, 2.0132 could be the important medium term top already.

Hence, firm break of the medium term rising channel support (now at 1.9621) will indicate that the whole rally from 1.8090 has completed and add much credence to the case that an important medium term top is already formed and put focus to 1.9183 low. However, on the upside, above 1.9968 will suggest that correction from 2.0132 has completed after drawing support from the medium term rising channel. In such case, cable could retest 2.0132 high before making the medium term top.

In the longer term picture, previous break above 1.9554 resistance (04 high) is favoring the case that long term up trend from 1.3680 has resumed after correction from 1.9554 was supported by 55 months EMA. However the structure of the medium term rise from 1.7047 is not clearly supporting this yet. And, we're still skeptical on it. The structure of the fall after finishing the current up trend from 1.7047 should reveal more information. But a strong break of mentioned 2.0106 resistance indicate add much favor to the case that multi year up trend from 1.3680 has resumed and hence should bring rally to next target of 61.8% projection of 1.3680 (01 low) to 1.9554 (05 high) from 1.7047 (05 low) at 2.0677 first.

[scalperfx]

Cable continued to draw support from the medium term rising channel support (now at 1.9654) and turned into choppy sideway trading last week. But after all, upside of the consolidation is still limited by mentioned 1.9792 cluster resistance (50% retracement of 1.9968 to 1.9621 at 1.9795). Even though further consolidation could be seen this week initially, another fall is expected sooner rather than later as long as 1.9792 cluster resistance holds. below 1.9657 again will indicate consolidation from 1.9621 has likely completed and should bring retest of this low. However, break of 1.9792 will indicate lengthier consolidation is underway and turn short term outlook neutral first.

In the bigger picture, cable is now at a juncture. As discussed before, an important medium term top could be in place at 2.0132 already. Firstly, firstly, the whole up trend from 1.7047 is not clearly impulsive. The preferred interpretation is that rally from 1.7047 ended with three waves up to 1.9024. Subsequent correction ended at 1.8090. Rally from 1.8090 has already met mentioned target of 100% projection of 1.7047 to 1.9024 from 1.8090 at 2.0067. Secondly, regardless of the larger trend, rise from 1.8090 can be interpreted as being a five wave sequence with first wave ended at 1.9142, second at 1.8517, third at 1.9913 and fourth at 1.9183. The channeling property supports this interpretation too. In such case, the fifth wave rally from 1.9183 has also met target of 61.8% projection of 1.8517 to 1.9913 from 1.9183 at 2.0046 too. With bearish divergence condition remains in weekly MACD and RSI, as well as daily MACD and key 2.0106 resistance (92 high) not decisively taken out, 2.0132 could be the important medium term top already.

Hence, focus is on the medium term rising channel support which cable is pressing now. Sustained break of this support will confirm that the whole rally from 1.8090 has completed and add much credence to the case that an important medium term top is already formed. Much deeper decline should then be seen in medium term, towards 1.9183 low first. However, strong rebound from this channel support and a break of 1.9968 resistance will suggest that fall from 2.0132 is merely a correction and has completed. That is, retest of 2.0132 high could then be seen before making the medium term top.

In the longer term picture, previous break above 1.9554 resistance (04 high) is favoring the case that long term up trend from 1.3680 has resumed after correction from 1.9554 was supported by 55 months EMA. However the structure of the medium term rise from 1.7047 is not clearly supporting this yet. And, we're still skeptical on it. The structure of the fall after finishing the current up trend from 1.7047 should reveal more information. But a strong break of mentioned 2.0106 resistance indicate add much favor to the case that multi year up trend from 1.3680 has resumed and hence should bring rally to next target of 61.8% projection of 1.3680 (01 low) to 1.9554 (05 high) from 1.7047 (05 low) at 2.0677 first.

[yohanip]

Hello there scalperfx, i really enjoyed reading your post about the market,especially for the weekly range, but i need to ask you about this stuff..
1. does this technical analysis based purely on the technical side? or should you use any economic news release?
2. how do we use the analysis? please give us a simple example that you might consider proper.

Thanks.

[13thheaven]

based on your monthly chart, is it possible that if the gu cannot break the 2.01xx then it will go down furiously?

[Resolve]

This topic is being updated for further discussions...

[Resolve]

This topic is being updated for further discussions...