Technical Analysis GBPUSD : 2014-08-14


Hello dear traders. Today we are going to analyze the sterling against the greenback forex couple. As we can see at the daily chart the currency pair breached the support at 1.6692 and fell to a new 2 ½ -month low at 1.6665. Downside bias prevails in the price chart and that is indicated by the falling trend line. Moreover, the 20 and 50 Simple Moving Averages have created a “death-cross” pattern and continue their declining path. However, there is not a reversal pattern formation and that concern us. The question here is, will this well extended bearish wave continue?


At the below chart we can see the daily volumes of futures and options traded on the Chicago Mercantile Exchange. We can see that on the last trading sessions the volume for the British pound has been increasing and especially on the August 13th. The latter signifies that the violation of previous support at 1.6692 is valid and suggests that downside bias would remain in place.

GBPUSD

Looking at the oscillators, the Stochastic has just entered the oversold territory and the OsMA is hovering slightly above the previous bottoms border suggesting the price move is overextended. The RSI (14) is down trending but has also dropped below line at 30, which indicates overextension. We should not exclude the possibility of oscillators moving even lower but that does not mean we ignore the contrarian signals. In our opinion, the GBPUSD is obviously biased for further lows, however the overextended oscillators indicate that falling path would sooner or later pause. We would favor for the immediate trading the downward continuation towards next support at 1.6557. For establishing new short positions we would use a lower risk/reward ratio and we will maintain our existing sell positions. Today we would watch carefully the US Jobless Claims expected to stand at 307K and tomorrow we are cautious for the UK Second Estimate GDP for the second quarter of 2014. The first GDP estimate was at 0.8%, higher than that would support the sterling.


Note

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