GBPUSD—at bottom of flag

The pound has been correcting in what appears to be a bear flag. It’s currently at the bottom of the flag at 1.5572. I still have two short positions on from 1.5992 and 1.5871 so I’m not in a position to go long but it’s possible there will be another climb to 1.5695/1.5717, the top of the flag depending on how you draw the line) before setting a stage where the downtrend could resume. Notice the subjective nature of trend lines in my last statement—some people draw them through candle shadows; some don’t. In this case, I’d be inclined to draw the line from the highest high at the beginning of the flag but the second line (in blue) “fits” better in that there are more touches. A break below the flag would target 1.5024, near a sweet psychological round number. Oo-la-la. I can hear the gnashing of teeth and tearing of garments if we get anywhere near that number.

Support:

1.5535 (yesterday’s low)
1.5359/75 (polarity; Jan 7th high)
1.5000/24 (flag target; round number)
1.4852 (uptrend line from Jan 2009)

Resistance:

1.5695/5717 (top of flag)
1.5735 (.382 retracement of move down from Feb 2nd)
1.5800 (round number; fib confluence zone)
1.5850 (EW boundary for current move down—wave 1 and wave 4 can’t enter its territory)
1.5986 (Fib confluence)

Here’s the three-hour chart:



© Dianne Fecteau, 2010. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.

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