Last week the dollar weakened prior to FOMC, helping the Cable rise during the first three days of the week. The UK GDP coming out as expected also supported the rise; illustrating the economy is doing well. In the FOMC statement on Wednesday the FED referred to solid job creation and said there will be an increase in interest rates following 'some further' improvement in the labor market. There were however no clues as to the timing of the rate hike. Cable rose again on Friday, after a far below expectations US employment cost index, leading to a dollar sell off. With all the fundamentally bullish impulses of last week, price failed to break above and close above the key resistance at 1.567
On the technical side, the Cable is trading inside an ascending triangle for about three weeks, printing a quintuple top along the way. It dropped 65 pips after the last failed attempt to break this resistance. There is a confluence with this resistance level and the 618 retracement of the swing low that preceded the triangle. We also have clear regular bearish RSI divergence; indicating underlying weakness and possible trend direction change from uptrend to downtrend. If the pair would break below and close below the lower trend line of the triangle, I would go short. More conservative traders could wait for a successful retest of the broken trend line before entering the trade. Monday we have the UK manufacturing pmi coming out, which will no doubt give an impulse to this pair.
The stop would go 30 pips above the flat top. TP1 lies just above the low of the swing low that precedes the triangle. TP2 lies just above the next key support level. See the chart for details. In terms of trade management, when TP1 is hit I would take profit on half of my position and roll my stop loss to breakeven, enjoying a risk free trade towards TP2.
There are +/- 400 pips to be made (depending on where it breaks to the downside) and the trade has a reward – risk ratio of +/-3.0!
On the technical side, the Cable is trading inside an ascending triangle for about three weeks, printing a quintuple top along the way. It dropped 65 pips after the last failed attempt to break this resistance. There is a confluence with this resistance level and the 618 retracement of the swing low that preceded the triangle. We also have clear regular bearish RSI divergence; indicating underlying weakness and possible trend direction change from uptrend to downtrend. If the pair would break below and close below the lower trend line of the triangle, I would go short. More conservative traders could wait for a successful retest of the broken trend line before entering the trade. Monday we have the UK manufacturing pmi coming out, which will no doubt give an impulse to this pair.
The stop would go 30 pips above the flat top. TP1 lies just above the low of the swing low that precedes the triangle. TP2 lies just above the next key support level. See the chart for details. In terms of trade management, when TP1 is hit I would take profit on half of my position and roll my stop loss to breakeven, enjoying a risk free trade towards TP2.
There are +/- 400 pips to be made (depending on where it breaks to the downside) and the trade has a reward – risk ratio of +/-3.0!
You don´t need to be a weatherman to know which way the wind blows - B. Dylan
