What Does This Pattern Mean For Cable? A very interesting...
What Does This Pattern Mean For Cable?
A very interesting consolidation pattern on the hourly chart for the GBP/USD. A rectangle is a continuation pattern. So since this pattern occurrs after a huge breakdown in price, we can expect price to continue to the downside and make new lows below 1.5490, the low of yesterday. But that is not the interesting part. We have seen sterling make this chart formation before. The interesting part is that the pattern continues to hold below the 50% Fibonacci retracement level on the top side. This is 50% of the King-induced drop in prices on Tuesday. More support for bears.
The Psychology
I have been hearing and reading a lot on market psychology in the past few weeks. And so I will start to acknowledge my own psyche in order to expose my biases. This will be a new addition to my analysis.
That said, I am a GBP/USD bear. Very different than last month (January 2010) when I was cautiously bullish. But last month, UK GDP came in much lower than expected (0.1%) and UK debt is INCREASING much faster than expected (£4.3B). The Bank of England (BoE) Governor Mervyn King and other members of the BoE expressed how alarming these 2 facts are in their testimony before Parliament yesterday.
On the other hand, the US economy is surprisingly strong though I remain skeptical on its sustainability. The US debt is also increasing but is only 5%-7% of GDP. While not acceptable, there are countries with worse ratios. Job creation and the fiscal spending to do so has taken center stage for the Obama administration which is not such a bad thing, according to IMF today. And in light of this, the US Federal Reserve (the Fed) Chairman Ben Bernanke continues to sound cautiously hawkish in his testimony before Congress today.
So I like GBP/USD short. I love corrective rallies because entries are important to me. I am biased to short the rallies and play a range to the downside. There. I said it.
On that note, trade what you see, not what I think!
~~~~~~~~~~~
You should follow me on Twitter: @faithmight
Or just read: www.faithmight.com
