GBPUSD Weekly Situation Up To 02/14/2008

The Pound Sterling has been destroyed by the great apprehensions about the British economy. One can see that both in the weekly and daily (insert) charts displayed here.

The currency dropped from a high of 2.116 (early November 2007) to a low of 1.934 (End of January 2008). This great descent has been achieved in 5 waves, which is an indication that the general trend in this pair is now down.

The question is: What now? We think that the next move should be up. The elements of technical analysis supporting this assumption are as follows:

1. The weekly price made a double bottom (violet ellipse 1), which is a reversal pattern. This pattern is very reliable and is also sometimes called a W, because of the general shape of the candles, including the test of the breakout at the neckline.
2. The mentioned double bottom occurred at the 61.8% Fibonacci retracement level. This level is usually the last "normal" place where a "normal" corrective move should stop. Although, we think that the move down was impulsive (5 waves) and not corrective, the fact that this level was the reversal point is quite bullish.
3. The same pattern was created also in the RSI in addition to multiple crossings of descending trend lines. (Violet rectangle 1). These events are the first sign of some re-thinking by the traders on a possible trend change.
4. In the MACD diff and in the STOC, we got the same effects. You can say that this is repetitive but the oversold levels reached are pointing to the extent for the recovery and the strength of the next trend or sub-trend.
5. In the daily chart (insert) you can see how the series of lower lows was broken. There is a need for a higher high to define a new sub-trend up.

Conclusion: We think that the GBPUSD is now going up in a series of ABC zigzags. The most likely target is between 2.025 and 2.050, but it needs to cross over many obstacles on the way like violet lines 1 and 2 (daily), the medium and long term averages and push the Bollinger band up.

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