GBPUSD—slogging along

It's one of those times I'm glad I took my 70 pips on part of the position yesterday. After that, the pair declined and took out the remainder of the position for +10 pips. So 1.5940 was the high, not that far from the 1.5995 prior high that many have been eyeing. This climb, if it's to be a climb, is a long, hard slog.

There's still a lot to like about the pair. Last Friday's move down to 1.5670 formed a hammer and led to a nice rise. I still have a daily bull flag (flag and target is the dashed line on the daily chart below). That target is almost intersecting a rectangular, up-sloping channel line. Price action this morning appears to be a retest of the diamond pattern (see yesterday's blog) breakout point although I'd have liked to see a bit more downside. One can also make a case, particularly on the weekly chart (not shown) that it's still within an Elliott Wave (EW) correction. I also have price targets from my point and figure charts that are higher. As a result of all this, I took another long position at 1.5862. If it can overcome the immediate resistance, one might see highs of 1.6458, 1.6870, and 1.7000.

If the pair fails again as it approaches 1.5995 (or if the 1.5940 was the high and it falls from there) then once it goes below 1.5297, it will confirm a double top. No double or triple top or head and shoulders pattern is confirmed before price breaches a high or low within the potential pattern. There are a lot of pips between here. Despite what I believe are the bullish reasons I listed above, there are several reasons the pair may fail. For one thing, the 1.5940/95 area is tough resistance with a Fib retracement level, price resistance and a fib confluence zone. Then too, the overall trend is down. So, stops need to be tight. Support is at 1.5833/16 (today's low and the 10-Day SMA) 1.5750, 1.5680/70, 1.5549, and 1.5349. As mentioned above, if the pair sees 1.5297 then it opens the doors to lows down to 1.50 and beyond.

Here's the daily 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.