ICmarkets
Short

Confluence to short seen on Cable around the 1.2557-1.2525 area

FX:GBPUSD   British Pound/U.S. Dollar
92 0 7
In a similar fashion to the EUR/USD             , the GBP/USD             also ended yesterday relatively unchanged. Nevertheless, cable’s H4 action remains a keen focal point for our desk. The resistance zone drawn from 1.2525-1.2557 is especially striking. The area boasts a H4 61.8% Fib resistance at 1.2531, a H4 mid-way resistance at 1.2550, a potential H4 three-drive approach (waves 1 and 2 are labeled, with the black arrow denoting the next potential third leg) and the top edge of the H4 zone represents the daily Quasimodo resistance at 1.2557. Now, in view of the last point, this does mean there’s a chance that price could fake through our H4 resistance zone, so traders need to be prepared for that. The final key thing to note here is the 1.25 handle. The majority of the market watches these levels, and are, on a regular basis, run for stops, which is exactly what we’re looking to see in this instance.

Our suggestions: While a fakeout above the aforementioned H4 resistance barrier is a possibility, we can still trade from here. Instead of placing a pending sell order and positioning stops just above the zone (not a good idea when a fakeout is likely), waiting for a reasonably sized H4 bearish candle to form within the walls of this region is by far, the safer, more conservative route to take here. This will, of course, not guarantee a winning trade, but will show that sellers have taken an interest here, before we pull the trigger!

Data points to consider: UK growth data (second estimate) scheduled to be released at 9.30am GMT.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: 1.2557-1.2525 (reasonably sized H4 bearish close required prior to pulling the trigger, stop loss: ideally beyond the trigger candle).

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