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Talking Points:
- GBP/USD Technical Strategy: Short at 1.6710
- Support: 1.6681 (trend line), 1.6593 (23.6% Fib ret.)
- Resistance: 1.6742 (Feb 14 close), 1.6800 (38.2% Fib exp.)
We sold the British Pound against the US Dollar at 1.6710 after prices put in a Bearish Engulfing candlestick pattern below resistance at 1.6742, the February 14 close. Negative RSI divergence bolsters the case for a downside scenario. A break below minor rising trend line support at 1.6681 exposes our initial objective at 1.6593, the 23.6% Fibonacci retracement. Alternatively, a turn back above 1.6742 initially aims for the 38.2% Fib expansion at 1.6800.
On balance, positioning is relatively little-changed since we entered the position: follow-through downward is yet to materialize but the short trade setup remains valid. As such, we will continue to hold short for now. A stop-loss is to be triggered on a daily close above 1.6822, the February 17 high.
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Daily Chart – Created Using FXCM Marketscope 2.0
— Written by Ilya Spivak, Currency Strategist for DailyFX.com