First, the uptrend line from January is at 1.4805. The pair is currently offered at 1.4892 (6:13 AM EST). GBPUSD dipped to a low of 1.4785 March 1 but this line essentially served as support. It probably will do so again although it is certainly exposed as they say. A definitive break below would be daunting for anyone who thinks the pound is going to recover anytime soon. Is there anyone that thinks that? I'm sure there must be. That's why trading takes place.
The second interesting level is at the .618 retracement level of the move up from January to August '09 climb. This, at 1.4848, so near the uptrend line, is reinforcing support.
Is it worth buying? There's significant risk with the heavily negative sentiment in place but as the pair moves closer to that uptrend line it will probably bounce. That bounce would most likely be a good place to short. 1.5016 to 1.5074 is a place where I'll get very interested. If it cleanly breaks the uptrend line there will probably be a pullback to the line which would be another opportunity.
Those intent on shorting shouldn't expect an immediate payoff as this is the fight it out level between buyers and sellers. If the pair does break the uptrend line, it wouldn't be unreasonable to expect to see 1.4397.
© 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.
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