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The cable is “resting” after a day that has a lot of traders scratching their heads. The price action after a 50 basis point cut is not generally known to cause a rally. The point here though, as is always the point in CHARTOLOGY is that price tells the most accurate story.

the fifteen minute chart here shows the cable moving sideways in an accumulation cycle after today’s rally which, by the way, saw a low of 4363 to a high of 4703.


But the real story was the ramp up before the rate cut. Take a look at a longer term intraday chart for that. Here’s the four hour chart:

gbp 4h 2-5-2009 7-46-56 PM.png

The point here is that before there was the dramatics most common seen across the shorter term intraday charts (like the fifteen below) the overall trend was up. Don’t agrue with price. Price reflects the psychology and discounted fundamentals of the market!

gbp 15m 2-5-2009 7-53-27 PM.png

So what’s the lesson here? First and foremost, don’t argue with price! It’s always right. Second, never expect an “automatic” response. And finally, when it comes to rate decisions, the rate cut is almost always completely discounted into price. The real unknown is the statement that will accompany the decision. It’s the mainly positive statement interpretation (think: stimulus = short term recovery) that rallied the cable today.

This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.