GBP/USD - Bearish divergence and major resistance overhead
Short term - Bearish bias on this currency pairing, and looking for counter trend selling opportunities in and around the 1.5500 to 1.5540 range, before bullish movement resumes. A close of a 4 hour candlestick above 1.5600 would invalidate this trade.
Technical - Textbook confluence of noteworthy structural and technical indicators, and we should see downwards price action next week. Major resistance overhead @ 1.5520 takes us to February highs. Bearish divergence can be seen on RSI with price action showing higher highs, but RSI not keeping pace. And finally, Friday’s price action which appears to be shaping into a double top. It could be a little choppy as we are above the 50 day MA. However we should hit our target 1.5311, taken from the 23.6% Fib (Retracement) in the coming week.
Risk - Risk to reward is healthy on this one. Assuming a 100pip stop, risk/reward is at 2.46 for our target.
Fundamental (medium term) – Given that markets and the sterling reacted positively to the UK election result, movement beyond our 23.6% fib target and particularly beyond the 38.2% fib is not anticipated. Over ambitious US Interest rate hike expectations may see some cooling in the coming weeks. Should expectations cool, bullish trend may resume and I have a medium term bullish bias on this pairing. Following this trade, I foresee movement upwards to the 1.5740, which is major resistance as well as the 127.2% fib (extension).
Technical - Textbook confluence of noteworthy structural and technical indicators, and we should see downwards price action next week. Major resistance overhead @ 1.5520 takes us to February highs. Bearish divergence can be seen on RSI with price action showing higher highs, but RSI not keeping pace. And finally, Friday’s price action which appears to be shaping into a double top. It could be a little choppy as we are above the 50 day MA. However we should hit our target 1.5311, taken from the 23.6% Fib (Retracement) in the coming week.
Risk - Risk to reward is healthy on this one. Assuming a 100pip stop, risk/reward is at 2.46 for our target.
Fundamental (medium term) – Given that markets and the sterling reacted positively to the UK election result, movement beyond our 23.6% fib target and particularly beyond the 38.2% fib is not anticipated. Over ambitious US Interest rate hike expectations may see some cooling in the coming weeks. Should expectations cool, bullish trend may resume and I have a medium term bullish bias on this pairing. Following this trade, I foresee movement upwards to the 1.5740, which is major resistance as well as the 127.2% fib (extension).