GBPUSD—weekly

Cable has fallen sharply to a low of 1.6136 this morning in the failure off the 1.6401 top yesterday. Looking at the move in the context of the weekly chart, one can see a symmetrical triangle with what looks like a corrective move off the 2009 low of 1.3503. There has been a series of three wave moves so far. While it has been tantalizing watching price nibble at the upper boundary, the probability is for a move back towards the triangle low at 1.4725.

Obviously, if it rallied and managed to take out the 1.6401, it would be significant. There still is a daily flag target of 1.7215. This is a valid target if one is bullish.

However, I'll confine this post to the downward potential. Three wave moves within a triangle from an Elliott perspective often relate by a Fibonacci number. These are close, but not spot on. The move from 1.7049 to 1.4229 was 80% of the move from the 1.3503 low. The move from 1.4229 to 1.6401 was 77% of the prior move.

Instead of discussing a triangle, one could also just assume an ABC correction where the C leg at 1.6420 was .618 of the A leg. This is close to where it failed yesterday.

On the way to 1.4725 Cable would find strong support at 1.6000. On the three-hour chart, this is the lower boundary of the channel I previously posted and 1.5982 was the last swing low on that chart. There, one could look at a long position but watch momentum and price behavior carefully.

I'm short this pair so I'll blog about it.

Here's the weekly chart:









© Dianne Fecteau, 2011. 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.