Weekly Report 24/10 -28/ 10/ 2011

Friday's closing above SMA 50 and above 50% Fibonacci retracement of the downside rally from 1.6615 to the significant low of 1.5270 argue us to change our last neutral stance into a bullish one. Having a deeper look at the daily studies we will find that the aforesaid downside move represents the CD leg of a potential bullish harmonic AB=CD pattern. According to harmonic rules that dominate the journey of technical targets, Fibonacci of 61.8% at 1.6100 should be touched since 38.2% was cleared earlier. Studying the movements of Sterling claim that the pair frequently tests 76.4% Fibonacci level in its corrections and actually these price behaviors match the technical idea of retesting the previous broken trend line on the provided graph. To recap, the market is quite bullish; noting that 61.8% of CD leg will be a big technical obstacle and that is why we should be careful when we enter the market this week.

The trading range for this week is among key support at 1.5555 and key resistance at 1.6440.

The general trend over short term basis is to the downsidetargeting 1.4225 as far as areas of 1.6875 areas remain intact.

Previous Report

Support1.58801.57801.57201.56301.5555
Resistance1.60001.61001.61501.62001.6295
RecommendationBased on the charts and explanations above our opinion is, buying the pair very carefully around 1.5900 targeting 1.6100 and stop loss below 1.5750 might be appropriate.