Bull Signal in GBP/USD Finally Appears

The FX Trader’s view - Over the last few weeks certain signs have been present that Cable bears were getting tired – but we have waited for an appropriate signal before swearing allegiance to the bullish cause. We now think there is enough to justify seeking some sort of recovery in this market.

• WEEKLY CHART: The structure of the whole downmove had indicated to us that the move was lately in a mature stage. This was backed up by a positive divergence on the Weekly RSI.
• There have been shorter term bull signals, but we wanted to see a close above a particular falling resistance line before taking a bull stance. This has now happened. Our initial target is the 1.5070 23.6% retracement, a later one the 1.6040 38.2% area. A s/term pullback is no surprise, and it doesn’t matter if price slips back below that resistance line – the signal that bull momentum is on the increase is in place. Support for a deep pullback may well be from the old s/term falling resistance/return line around 1.3900 currently. But buyers on dips may favour the 50/61.8% area of the 1.3653-1.4778 upleg, 1.4215/4083, for entry, stops likely just below 1.3653 11-Mar low, seeking partial profits at 1.5000/5070. This analysis goes wrong if the 1.3653 low fails.

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