Weekly Picture for the GBPUSD Up to 12-13-2007

In this piece, we try making sense of the great gyrations in the British currency versus the US Dollar. In the attached weekly chart, we can see that the pair did work its way up from the beginning of the year 2006 in a series of higher highs and higher lows.

The problem was and is, to stay the course with such volatility in the price action. Look how the candles are extended and switch from side to side (a good example in August this year), and causes traders with even the most rigorous discipline to be thrown out by their Stop-loss.

The main successful feature in this pair would have been to go long when the price got near or at the lower boundary of the great ascending channel (which is very close to the 200 Days Simple Moving average), and sell at the upper boundary. Long term investor had an advantage because they would not have been inclined to trade so much and in this case, would have benefit from the buy and hold strategy.

What is the current technical picture of this asset? Let's start at the indicators:

First, we can see a bearish divergence between the RSI and the price (1 green) between the tops of June and November. The same RSI is also rebounding at the very important 50 level (2 green) when the price is very near the lower boundary of the channel. A break of each one or both would be critical to the downside.

The MACD diff is very mild for a very long time and this says that we did not have a good trend but a very slow muddle through up move. The Stochastic is trending also down and actually moved down under its 50.

On the price side we can notice the following:

From the top of the last move up, near the 2.12 area (4 green), the pair declined rapidly and stopped only near the obvious 50 Days Simple Moving Average). It did reach the proximity of the lower channel boundary and actually rebounded there (5 green). The fact that the 50 DMA was not re-conquered is bearish and should be done to continue the great multi-year bull move. Look how we got lately a series of lower highs and lower lows (daily chart insert).

Conclusions:

Disclaimer

By no means do any part of this article recommends, advocates or urges the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author and his company express personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this article. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. The content of this article was created with the best known data at the time. The writer and his company are not responsible for the accuracy or completeness of the mentioned data. The writer is not a registered consultant of any kind and so the reader should not see any single part or the whole analysis as an advice for any kind of action in the financial markets.
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About the Author

Moshe Shalom Head of Technical Analysis Department ForexManage Ltd Site: www.forexmanage.com Email: This email address is being protected from spam bots, you need Javascript enabled to view it