Cable Bears Remain a Threat

The FX Trader’s view - As with other markets GBP/USD has been broadly consolidative during June and July, with upside attempts being successfully repelled so far. In recent FX Trading Guides we have wondered if the 30-Jun spike to 1.6744 and drop back marked a blow-off move, in preparation for a better bear phase – and we still believe this is a prospect.

• WEEKLY CHART: Note how the 2009 bull move has stuck around the 38.2% level of the entire prior move down, and is also capped by the 50% level of the downleg that started from 2.0153 Jul-08 high.
• DAILY CHART: In the FX Trading Guide we had noted potential resistance from the small 76.4% level at 1.6565, which has worked very nicely. (we currently hold theoretical short positions with stop just above 1.6600) However, bears still need at least a close below the 1.5982 08-Jul low for a decent confirmation of their stance – the small channel base projection runs near here too now. We would then initially target towards 1.5500, the 38.2% pullback level. In some of the markets we cover we had recently switched to a sidelined stance, but we had retained our bearish stance in GBP/USD. This fits in with our s/term bullish view of EUR/GBP (please refer to a previous Update for details).

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