GBPUSD—taking a pounding

The pound is taking a pounding and it’s questionable whether it’s over. The pair touched 1.5654 this morning, after having merrily swooped past its prior low of 1.5708 in October.

I have two short positions left from the three you saw yesterday. I just closed the one from 1.6246 for +544 pips. The other shorts are from 1.5992 and 1.5871. I also took partial profits from the 1.5992 one at + 287 pips.

Is the next low 154.50 from May? I wrote yesterday that the pair had to break 1.5708 with a definitive move Even though it closed below it on the three-hour chart, I’d like to see it reach back and kiss it good-bye (definite short there for me unless the candles become intensely bullish). Why? Because the fall is too far, too fast for my taste. Unless it’s an out and out blood bath, it needs to pause. Beyond 1.5708, the pair could find resistance at 1.5800/06, 1.5886, and 1.5912. That last is the uptrend line from March lows and a fib confluence zone. Then, of course, there’s the psychological round number of 1.60, not far above the downtrend line coming in from the January 28 high.

Support levels are:

1.5654 (today’s low)
1.5609 (2003 lows)
1.5500 (psychological)
1.5450 (May low)
1.5373 (Spring ’09 resistance)

The last candle that closed on the three-hour chart was what’s known as a “high wave” candle with a small body and long upper and lower shadows. It hints that the market is losing its directional bias so be careful about shorting here. If it closes below that candle’s low—the 1.5654—expect more drops.

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.

My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.