Tories To Drive Pound Higher
Dragonfly Capital | May 08, 2015 07:44AM ET
That may be the headline in the London Financial papers. The early exit polls as I was writing this suggested a Tory win. Meaning the current prime minister, Cameron, would retain his government. I have to admit that despite living in London for a couple of years that is about all I can tell you about this process.
But it is just a narrative to rationalize what is happening in the currency. I don’t really need a narrative to explain to me the why of the currency move. Just knowing it is happening is enough. I will let the price action on the chart tell me the story. And it seems to have a lot to tell.
First there are a few price patterns. The redlines mark out a ‘W-V’ pattern. This is a bottoming and reversal pattern. The whole of the ‘W-V’ is also part of a broader Inverse Head and Shoulders pattern. The Head is a bit dented, but it still gives a target on a break higher to at least 164.25. And by breaking higher, I mean over the blue trend resistance line, which also happens to act as the neckline of the Head and Shoulders. The momentum indicators also look to support a continued move up. The RSI pulled back to the mid line but is rallying again, remaining bullish. And the MACD is turning back up after a small pullback. Maybe the election did trigger this shift to strength in the Pound, but there have been clues for a month prior.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.
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