Weekly Picture for the GBPUSD up To 12-17-2007

In our latest review of the weekly picture of the GBPUSD, we said:

"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 was 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.

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 pair is at a critical weekly junction. The indicators have all a bearish stance and the price should move over the 50 DMA to show the strength needed for getting a new high. A break of the 200 DMA in conjunction with a move of the RSI under 50 and a negative MACD diff, would tell that the long term trend has changed to the worse."

And we thought that it will be a good thing to reload the pair for analysis after the tremendous move of the last three days. What is new now?

1. The RSI reversed and did NOT rebounded this time from the 50 level, like it did in August, but broke down under it (2 green). Bearish.
2. The MACD diff (difference between the MACD line and its moving average) has registered a deeper than usual drop. This new value is the lowest since mid-2006 (3 green). Bearish.
3. The RSI divergence and stochastic descent still stand as they were. Bearish.
4. The daily price insert is continuing to show lower highs and lows. Bearish.
5. The price is under the 200 DMA. It is by a very small amount but still Bearish.
6. The price has reached the lower boundary of the ascending channel, near the 2.01 area. If a rebound will not crystallize very soon, and if the pair will drift lower toward the 2.0 area, we will have a major change. This is not bearish but critical.

In short, the next few days could say if the pair has decided to change course and create a new trend down or not. Such a change could bring it to the 1.91 area (50% retracement) or even the 1.86 area (61.8% retracement).



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