Forex Technical Update August 9, 2010
GBP/USD - Stalking Throwback
- 1H: The GBP/USD is starting this week with some topping action. The 1H chart shows a triple top from which the market is declining.
- We know by looking at the daily chart below that the GBP/USD has been very strong, and the outlook is no longer bearish. The trend is bullish, so declines are corrections.
- In this case, a short-term projection is made to 1.6235.
- The question is: Will the market reach this level without a significant correction? Possibly the market is not ready for a correction until reaching this level?
- If the market is supported above the 61.8% retracement level, preferably above 1.59, the bullish momentum is still very strong, and the chances of reaching 1.6235 is higher.
- Otherwise, we may find ourselves in a correction, or sideways action for the week.
- Daily: The daily chart shows the pair with strong bullish momentum, as the RSI reaches into the overbought zone. There is however a developing bearish divergence that would be official wiht 2 days of decline including today's.
- We see here that if there is a correction this week, that the 1.5500 level should provide some support. Another reason we may see a correction or at least a consolidation is that the market is right below 1.60, a psychological level, and also testing the resolve of the 61.8% retracement level which was at 1.5870.
- Although the 50-period moving average has not crossed the 200, the acceleration of the rally makes it a very high likelihood it in the future. How long will it take depends on whether a there will be a correction or ranging action. This is one case where I think it is okay to complete the signal before it is official.
- In any case, watch for a slingshot type of action if the market does correct towards 1.55. A slingshot is when the price crosses the moving average (200-period here), and then tests it before continuing in the directino of the crossover.
- If the market is indeed bullish, the 200SMA residing there, should provide support.
Commodity Trading Advisor
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