Trading opportunities for currency pair: There’s no point rushing for the moment. The pound managed to return to the trend line on Friday issuing support from the euro/pound cross. Monday will be decisive since the price will either recoil from the trend or will break through it. We could see a false break before the Bank of England convenes so be careful. If the pound bounces back, the target is 1.5150, if it breaks: 1.5554. I’m not looking at it going any higher for the moment.
The last GBP/USD idea I made came out on 21st September. When the idea was published, the GBP was trading at 1.5522. A candle pattern then formed which weakened the pound’s position. Due to this I was expecting to see a return of the rate to the trend line. In fact, the pound/dollar fell by 416 points to 1.5106 with recoiling for nine days.
What’s interesting at the moment?
On Friday, the pound/dollar renewed to 1.5467. The buyers used the weakening of the euro after the ECB meeting and the ambiguous US data to their own interests. The sellers began to worry and the buyers were washing their hands, expecting to see a return to 1.5675. Although, for this we needed to see a break in 1.5555 (main trend line from the 1.7190 maximum).
The buyers didn’t manage to get back their Wednesday’s losses and close the week in profit. But for how long? On Thursday the BoE is set to convene. After the conclusions of the meeting are released, the minutes will come out, accompanied by a speech from the Bank’s governor, Mark Carney.
Traders are most of all worried about the results of the voting on interest rates. An increase in votes for an increase in rates will spark a growth in the pound against the trend. The technical side is powerless against fundamental factors.
The pound/dollar is underneath the trend line. Since the pound closed Friday up against the USD and the upward movement was strong, expect a return to the hourly LB at 1.5340 on Monday.
A full covering of Friday’s body will see the forming of a pound sell signal. Later we’ll need to act as the situation develops. The week is full of important events so, for those not trading before the NFP, it’d be better to stave off trading until next Monday. A break in 1.5505 will see the pair shift to 1.5658.
Traders having been buying pound against euro for three weeks in a row. After Draghi’s press conference, the euro’s fall hastened. A fall in the EURGBP will offer real support to the pound. Though this will depend this week on whether the pound weakens against the dollar or not.
I’m leaning towards saying the euro will stay under pressure before the ECB meeting (4th December). A correction is possible, but the indicators are saying otherwise.