Forex Technical Update
Bullish Divergence, Negative Reversal:
- Brent is supported after cracking the $100/bbl level. We also see a bullish divergence with the RSI in the 4H chart.
- However, also note that if the market doe not close out the gap (we started the week with), it could be in the process of developing a negative reversal signal (higher RSI high, lower price high), which suggests bearish continuation.
- A rally to 109.50 would rid this signal, but is vulnerable to being faded there as well. Only a break above 112.05 and a break of the RSI above 60, suggest a reversal back to the upside.
- Looking at the daily chart, we see that the upside outlook is losing ground, expect maybe in the short-term.
- The RSI maintains below 60, and shows a bearish momentum. Price action has broken below the 200SMA.
- However, at this point, we have completed 3-swings down, which invites bullish intent.
- If we can break above 109.50 and then maintain above 107.00, we should be heading towards 112.00-113.00 area.
- Then, if the market respects 113.00 central pivot of the consolidation pattern, we should be able to retest the 100 level again.
- 98.25 and 91.50 area 50% and 61.8% retracement targets below 100.
Are you convinced that the BoE won't be messing with QE? Does this give fire under GBP/USD as the US does not have this inflation worry?
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Fan Yang CMT
Chief Technical Strategist