GBP/USD: ABCD Pattern Completes
Blackwell Global | Apr 27, 2016 02:54AM ET
The Cable has had a relatively positive few weeks as the pair appears to have shrugged off some of the recent BREXIT worries. However, itsprice action has now entered a key reversal point which could see it tumbling back towards the 1.42 handle.
Taking a look at the Cable’s 4-hour chart shows some interesting patterns emerging over the past few days. It would appear that the pair’s recent rally has taken it perilously close to a key reversal point from early February. The failure to breach that point subsequently led to a sharp decline towards support at 1.3835 and it appears as if we are reaching a similar point within this current cycle.
In addition, the technical indicators are also indicating a significant retracement under way given the fact that the latest high at 1.4633 actually completed the ABCD pattern. Subsequently, it is likely that the pair will look to retrace back towards the 38.2% Fibonacci level at 1.4256. Further supporting the short contention is the RSI Oscillator which has now trended into overbought territory indicating that a pullback may be required.
However, there is a fundamental risk event looming on the horizon with the release of the UK Advance GDP figures. The GDP results are largely forecast to come in at 0.4% q/q but there is a unknown risk component within the release. Recent instability within markets caused by BREXIT talk, and the rapid appreciation of the pound, is likely to have impacted the result. Subsequently, watch the outcome closely as it is probable that it will sharply impact the pair.
Ultimately, the Cable can be a difficult currency to trade given the required width of stops and the general volatility of the pair. However, the currency is exhibiting some strong impending signs of a short side retracement which is likely to see it trading at significantly lower valuations. Subsequently, look for the pair to make a move within the coming New York session but watch for any fundamental news releases.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.