Thursday, August 18, 2011

Trading range (2011-08-18 GBP/USD analysis)

As expected, the world's stock markets are running kind of flat these few days. Traders do need to take some rest.

4-Hour chart of Great British Pound (GBP/USD):















Sterling is currently moving along a upwards trend, with last five consecutive white candlestick. In fact, yesterday it made a critical move: breaking out of the resistance in late July.

Tracing back to mid-July, we can find that the pounds broke out the dotted red down-trend line. The trend was supposed to have changed. However, in late-July, the area 1.643-1.647 was a very strong resistance to the price. GBP could not break out and could only form a box shape.

In early August, price plunged but recovered quickly, and formed 5 consecutive white candlesticks these few days.

Reaching the resistance at 1.659, GBP fell again. We can expect a very strong support at around 1.647 provided by both the zone and the green short-term up-trend line.

Therefore, the next trading range should be at from 1.647-1.659. If the pounds break 1.659, then it would reach the previous high at 1.6737.

On the contrary, breaking down 1.647 also means a breakdown of the short-term up-trend line and hence a short trend reversal. 1.62 is a must if this happens.

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