The rally which started in GBP/USD on Monday has continued today with spot breaking above the 38% retracement of the June – September decline to trade at a new high for the week. I am generally still negative on cable and view this move higher as minor correction against the downtrend in place since June. The big question for me is where does the downtrend try to re-assert itself?
The resistance zone between 1.5530 and 1.5560 looks like a clear point of interest for the market as it marks a confluence of the 50% retracement of the June – September decline, the 61.8% retracement of the August – September decline, the neckline of the multi-month H&S pattern, the median line of the June low, the 3rd square root relationship of last week’s low and the 50-day moving average. If the downtrend is indeed going to re-assert itself soon then this looks like a zone from where it could happen. Traction above this zone would warn that the pound is trying to undergo a deeper retracement (like in August) towards 1.5650/80. Above there would turn the technical picture outright positive.
Looking to sell GBP/USD on a failure around 1.5530 if it gets up there over the next day or so. A daily close over 1.5580 would force a near-term re-think.
Still short USD/JPY from around 121.50. Took profit on some. Stop now at cost on rest.
