Judging from the long term chart pattern and other technical indicators, sentiment for the Cable should be to the downside.
As the year ended, the Cable traded in the middle of a consolidation pattern from the sharp downtrend in 2008. The GBP/USD retraced the 2008 slide up to the 38.2% Fibonacci level but failed to proceed any higher. This hints to further losses in the pair. Supporting a move to the downside are the falling stochastics on the monthly chart. The failure of the Cable to maintain a level above the 20-month moving average also does not bode well for the pair.
Short term support for the GBP/USD can be found near the 1.5300 level, with further support at the bottom line of the long term consolidation pattern at 1.4590. A breach below this level may trigger further selling with a long term target the 2009 low of 1.3500.
Resistance for the Cable should be the 20-month moving average at 1.5755, followed by the 38.2% Fibonacci retracement from the late 2007 to early 2009 downtrend at 1.6430. This level coincides with the downward sloping trend line from the 2007 high. A move above this level may target the 2009 high at 1.7040.
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Russell Glaser is a Currency Analyst with ForexYard. Russell provides analysis in the FX spot market by employing fundamental research methodologies. In addition to currencies, Russell closely follows the correlation between the Commodities market and the movement of equities. His writings have been published on the ForexYard Trading Blog and associated partner sites. Prior to joining Forexyard, Russell Glaser served as a management consultant in the financial services industry, advising Fortune 100 companies. Russell holds a degree in finance from the Fisher College of Business at The Ohio State University.
