Matt Simpson, CFTe, MSTA
CityIndex
After remaining contained between 100.80 - 103 for nearly 6 months, the recent breakout could be just the beginning of a much larger move.
The breakout of the range will be welcomed by traders who have been anticipating a return to the dominant bullish trend following the 2011 all-time lows. Last week closed at its most bullish in 60 weeks and outside of the Bollinger Band. The preceding 3 times we have seen a close outside the weekly Bollinger Band provided heads-up to continued gains, so this signal should not be ignored this time around.
Price has already respected 104.32 resistance zone and trades within a suspected wide-ranged, bullish channel. However due to the velocity of the breakout I am not convinced this wide bullish channel will see complete pullbacks. At this stage I suspect retracement may be shallow and a break below 103 will deem the bullish advance as a 'fakeout'.
Intraday price action has already witnessed the weekend gap close with a 'higher low' forming. We also appear set to break to fresh new weekly lows which suggest a deeper pullback before the bullish trend continues. At this stage I favour 103.50 holding so any retracements towards here could be considered for bullish setups.
A break above 104.32 targets 104.80 and 105.48
A break below 103.50 opens up 103.20 and 103
Below 103 invalidates the bullish breakout and we return to sideways trading
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