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Rebound we've expected finally occured. After a more than 1,000 pips run, consolidation starts. THe DailyPicture is looking at what Friday price action may be.
On a technical side, 3-days rebound has been effective and the corrective trend is going on. However, it's Friday. A dangerous trading day by definition, as US news, rumours, week close,
and even month close for today will brings some stress on currency markets.. We expect spikied moves and highly volatile price action.
On the fundamental side, UK economy, even if still quite robust, is strongly affected by US financial crisis than
it's European counterparts, and thus is already 'officially' in recession..
We are entering a game called 'who's the worse', where the goal is to determine possible currency moves according to US & UK situation improvement or deterioration.
That means, each bad economic news from US may affect UK currency negatively, while any improvement in UK may affect national currency positively,
especially if US situation also improves.
Waiting a global improvement witch may takes weeks and months, volatility remain high as investors
are affraid by any worse-than-expected eco. datas witch may be a catalyst for recession confirmation, witch may send the UK currency lower.
On the data front, several 2nd class economic releases may be a catalyst to confirm technical setup. Monitor the 1230 GMT moves..
Chart commentary : GBP/USD 1-Hour Chart
To the downside,
Current consolidation pattern is called falling wedge. Appromiately 45% of chances to see a break lower.
If price goes below 1.6100 - 1.6090 today's lows, we may see an accelerated downside move to 1.5960.
If no rejection here, expect continuation towards 1.5800 levels.
To the upside,
we expect a bullish break of current falling wedge, witch has 55% chances to occur.
The 1.6330 - 1.6380 resistance zone has to be outperformed in order to expect a test of the 1.6450 wedge high.
Break above targets 1.6600/40 highs.
Indicator's Status
:
- Slow MACD neutral. As a lagging
indicator, break of wedge with a MACD positive cross above 0 is needed to validate the break.
- Fast stochastic bottomed and still in a positive cycle, witch will be confirmed once above 50 level.
- RSI is near oversold lelves and just reversed, giving a good continuation signal. Reading above 50 confirms that view.
- W%R ended a negative cycle, but still neutral. As RSI, we await a reading above -50 to enter the market with limited risks.
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