Since July, GBPUSD has been falling like a rock thrown from the 21st storey of an apartment block. The prospect of buying GBP against the US Dollar in such a protracted downward move would, to many, seem ridiculous...until now. While the trend may be our friend until the end when it bends, GBUSD does look like it may have reached a point where we could – at least – see some upward movement.
_20141020083737.jpg "GBPUSD Daily")
Whether we see a short-term retracement or a medium term upward move or a continued move down - this is yet to be seen. After all, anything can happen at any time and there are absolutely no guarantees when it comes to what way the market could turn... But we have a number of reasons which point to a long argument.
Whether we see a short-term retracement or a medium term upward move or a continued move down - this is yet to be seen. After all, anything can happen at any time and there are absolutely no guarantees when it comes to what way the market could turn... But we have a number of reasons which point to a long argument.
In favour of the trade
- Weekly timeframe: Last week closed as a bullish pin bar reversal off the psychologically significant 16000 level
- 16000 corresponds with soft level of support/resistance which overlaps with the 50% Fibonacci Retracement of move up.
- Bullish reversal divergence on the weekly timeframe on the Stochastic with signal line about to cross up through the oversold line.
- Inverse head and shoulders on hourly timeframe
Against the trade
- The daily timeframe is still trending downwards – making lower highs and lower lows while respecting the 20ema.
- The conspicuous absence of a higher low on the daily timeframe
Conclusion
One for the watchlist. Hold your horses! GBPUSD is at a great technical level – we just need the confirmation of a higher low on the daily. Waiting for the set-up to tick all the boxes before we trade it is a good exercise in discipline and patience.
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