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Forex: Scalping the GBP Rally- USDOLLAR, AUD Approach Key Levels

Forex: Scalping the GBP Rally- USDOLLAR, AUD Approach Key Levels

2012-11-26 20:19:00
Michael Boutros, Technical Strategist
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GBPUSD Daily Chart

Forex_Scalping_the_GBP_Rally-_USDOLLAR_AUD_Approach_Key_Levels__body_Picture_4.png, Forex: Scalping the GBP Rally- USDOLLAR, AUD Approach Key Levels

The sterling's breach above 1.5955 was technically significant as it breached the S1 monthly pivot and the 38.2% retracement from the November 1st high (also was the close low in October). The pair encountered resistance at the 61.8% extension at 1.6040 and this level will now act as our topside limit with a breach above the highs at 1.6048 eying the key region at the near-confluence of the monthly pivot, channel resistance, and the 78.6% retracement just below the 1.61-handle. While we maintain our bullish bias on the pound, it's important to note that a pullback into the S1monthly pivot may be in the cards before heading higher with developments out of Europe likely to continue to dictate market sentiment. Only a break back below the 38.2% extension taken from the June advance at 1.5910 invalidates our broader outlook.

GBPUSD Scalp Chart

Forex_Scalping_the_GBP_Rally-_USDOLLAR_AUD_Approach_Key_Levels__body_Picture_3.png, Forex: Scalping the GBP Rally- USDOLLAR, AUD Approach Key Levels

The 30min scalp chart shows the pound trading within the confines of an ascending channel formation dating back to the November 16th lows with an embedded descending channel forming off Friday's high. Interim support rest with the 50% retracement at 1.5998 backed by 1.5977 and the 38.2% retracement at 1.5955. A break below channel support suggests a deeper correction may be at hand with such a scenario targets at 1.5925 and the 1.59-handle.

A breach above the Asian market highs shifts our focus higher with a breach above interim resistance at the 61.8% retracement at 1.6040 eyeing topside targets at 1.6070 and the 78.6% retracement at 1.6098. Subsequent break targets are eyed at 1.61350 and the monthly high at 1.6174. A daily average true of 72 pips and so yields profit targets of 18-20 pips per scalp depending on entry. Should ATRto pullback dramatically, adjust profit targets as need to ensure more feasible scalps.

*We will remain flexible with our bias with a breach above the 1.6040 eyeing subsequent resistance targets. It’s extremely important in these market conditions to give added consideration regarding the timing of intra-day scalps with the opening ranges on a session & hourly basis offering further clarity on intra-day biases.

Key Threshold Grid: GBPUSD

Entry/Exit Targets

Timeframe

Level

Significance

Topside Limit

30min

1.6040

61.8% Fib Retracement

Break Target 1

30min

1.6070

Soft Resistance

Break Target 2

30min

1.6098

78.6% Fib Retracement

Break Target 3

30min

1.6135

Soft Resistance

Break Target 4

30min

1.6174

Monthly High

Support Target 1

30min

1.5998

50% Fib Retracement

Support Target 2

30min

1.5977

Soft Support

Bottom Limit

30min

1.5955

38.2% Fib Retracement

Break Target 1

30min

1.5925

Soft Support

Break Target 2

30min

1.5905

23.6% Fib Retracement

Break Target 3

30min

1.5880

Soft Support

Average True Range

Daily

72

Profit Targets 18-20pips

Market Notes & Prospects:

USDOLLAR Daily Chart

Forex_Scalping_the_GBP_Rally-_USDOLLAR_AUD_Approach_Key_Levels__body_Picture_2.png, Forex: Scalping the GBP Rally- USDOLLAR, AUD Approach Key Levels

We noted this setup on the Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) in the last Scalp Report as the dollar struggled to mount the R2 monthly pivot and channel resistance just above 10,050. The pullback has found support at the 100-day moving average just below the R1 monthly pivot at 9970. Note that daily RSI is now testing that 50-mark with a break below this level likely to take the index into key support between the 38.2% retracements at 9945-9963. The index remains constructive (bullish) above this region with a move below this mark suggests a deeper correction into the confluence of the 50% retracement and the monthly pivot at 9906.

AUDUSD Daily Chart

Forex_Scalping_the_GBP_Rally-_USDOLLAR_AUD_Approach_Key_Levels__body_Picture_1.png, Forex: Scalping the GBP Rally- USDOLLAR, AUD Approach Key Levels

The Australian dollar posted an impressive rally on Friday taking the pair above the 61.8% retracement taken from the September decline at 1.0445. The focus now shifts to the confluence of the 100% extension taken from the monthly low and the R1 monthly pivot at 1.0480 (note monthly high 1.0481). A breach above this level eyes topside targets at the 1.05-handle, and the 161.8% extension at 1.0560. Note that daily RSI seems to have encountered resistance just ahead of the 60-threshold (typically indicative of broader bearish markets) with a breach above putting our topside targets in view. A break back below the 1.04-handle puts us back on the short side targeting the confluence of the 38.2% retracement and channel support at 1.0335.

For more trade ideas, refer to today's Analyst Pick

View my StockTwits Chart Stream for Updates on these setups

---Written by Michael Boutros, Currency Strategist with DailyFX.com

To contact Michael email mboutros@dailyfx.com or Click Here to be added to his email distribution list

For updates on these setups and more follow him on Twitter @MBForex

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