GBP/USD (daily chart as of March 7, 2014) has been unable to clear
1.6725, the high of both February 21 and 25, for more than a week. In
the meantime, the euro versus the U.S. dollar has been making fresh
highs. Cable’s recent climb is still lacking in strength, as mentioned
in our February 26 analysis. Price tried to close just above the 1.6725
mark on February 28 and March 2, but failed on March 3 with a strong
bearish candlestick that closed at a low of 1.6650 (arrow on chart),
which wiped out all the gains of its previous six trading sessions.
The subsequent three candlesticks after March 3 were all weak with longer upper shadows, indicating accumulated downside pressure. Candlestick and price action analysis give us valuable information with regard to the struggle between bulls and bears, and we should consider those warnings as precautionary. This means that while we may not necessarily short the pair right away, if we already have long positions it might be the time to consider exits in order to reduce risk.
If today we have another weak close, it would further strengthen those warning signals. The pair needs to stay above 1.6725 in order to reject this bearish outlook for the short term, and move up to challenge the high of 1.6820. If price is unable to clear 1.6725, it could turn down again to test the short-term uptrend line connecting the lows since February 24, and potentially the daily EMA 50 and EMA 100. The Bank of England has kept the rate at 0.5% and maintained its easing policy at 375 billion pounds.
Support levels below:
1st support: short-term uptrend or daily EMA 20
2nd support: 1.6600 or daily EMA 50
3rd support: daily EMA 100
Resistance levels above:
1st resistance: 1.6725 (February 21 and 25 high)
2nd resistance: 1.6820 (February 16 high)
3rd resistance: 1.7000 (psychological level)
The subsequent three candlesticks after March 3 were all weak with longer upper shadows, indicating accumulated downside pressure. Candlestick and price action analysis give us valuable information with regard to the struggle between bulls and bears, and we should consider those warnings as precautionary. This means that while we may not necessarily short the pair right away, if we already have long positions it might be the time to consider exits in order to reduce risk.
If today we have another weak close, it would further strengthen those warning signals. The pair needs to stay above 1.6725 in order to reject this bearish outlook for the short term, and move up to challenge the high of 1.6820. If price is unable to clear 1.6725, it could turn down again to test the short-term uptrend line connecting the lows since February 24, and potentially the daily EMA 50 and EMA 100. The Bank of England has kept the rate at 0.5% and maintained its easing policy at 375 billion pounds.
Support levels below:
1st support: short-term uptrend or daily EMA 20
2nd support: 1.6600 or daily EMA 50
3rd support: daily EMA 100
Resistance levels above:
1st resistance: 1.6725 (February 21 and 25 high)
2nd resistance: 1.6820 (February 16 high)
3rd resistance: 1.7000 (psychological level)
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