Stocks and indices are getting slammed, and Dollar is gaining before the FOMC. We saw that one before, but the drop's magnitude on stocks is panic-like and may not be easily stopped. Today, we will leave stocks and focus on the Forex market. Today we will look at the GBPUSD pair, which is getting ready for a major bearish reversal.
The whole of December and the first week of January were really great for the cable. The price moved with great respect for the principles of the technical analysis. Check it out yourself. First of all, the bearish correction managed to stop on the 38,2% Fibonacci, which is an extremely important support for me. In addition to this, the whole correction was shaped like a flag (green), which often increases the chances for the trend continuation.
The breakout of the 23,6% Fibo and the upper line of the flag happened at the beginning of the year and gave us a legitimate buy signal. The legitimate signal happened to be a false one, unfortunately. Buyers wasted a very handsome price action setup and the price reversed, creating a false breakout pattern (red). Price is now back below the Fibo and the upper line of the flag. With that, the signal can be only one: sell.
The sentiment is negative, as long as we stay inside of the flag. Price climbing back above can be considered a buy signal, but chances for that are now limited.
Trading FX/CFDs on margin bears a high level of risk, and may not be suitable for all investors. Before deciding to trade FX/CFDs you should carefully consider your investment objectives, level of experience, and risk appetite. You can sustain significant loss.