Review Of British Pound
Eric De Groot | Apr 24, 2016 08:17AM ET
The British pound, building cause as capital migrates to the relative safety of the United States (US dollar) from economic, political, and social uncertainty stemming from controversial policies (1,2,3,4,5) and inclusion within the EU that many believe sacrifice national sovereignty for the pretense of prosperity, security, and normalcy (1,2,3) should resume mark down once the dollar jumps the creek. Continued participation in the EU and alignment to the failing euro will likely accentuate mark down as liquidation intensifies in 2017. Traders playing this transition should be following the cycle of accumulation and distribution not only in the pound but also the US Dollar Index.
Investors, largely driven by emotions rather than discipline, tend to focus on volatility rather than the message of the market. This tendency prevents them from recognizing better opportunities in quieter markets.
Summary
The BEAR (Price) and BEAR (Leverage) trends under Q2 accumulation after the seasonal high position the British pound as a focused bear opportunity since the second week of November.
Price
Interactive Charts: FXB, FXB PF
The long-term trend oscillator (LTCO) defines a down impulse from 159.85 to 140.99 since the second week of September 2014 (chart 1). The bears control the trend until reversed by a bullish crossover. Compression, the final phase of the CEC cycle, generally anticipates this change.
A close above 153.40 jumps the creek and transitions the trend from cause to mark up, while a close below 138.07 breaks the ice and transitions it to mark down.
Chart 1
Leverage
The long-term leverage oscillator (LTLO) defines a bear phase since the second week of November (chart 2). This focuses the down impulse (see price).
A diffusion index (DI) of 25% defines Q2 accumulation (chart 3). A capitulation index (CAP) of 47% supports this message (chart 4). DI and CAP's trends, broader flows of leverage and sentiment from accumulation to distribution and fear to complacency supporting the bulls (red arrows), should not only continue to extreme concentrations but also restrain downside expectations until reversed (see price). A decline under these trends, a sign of weakness (SOW), would be bearish for the pound longer-term.
Chart 2
Get The News You Want
Chart 3
Chart 4
Time/Cycle
The 5-year seasonal cycle defines strength until the fourth week of April (chart 5). This path of least resistance restrains downside expectations (see price).
Chart 5
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.