For our last look of the week for position plays, we’ve got a bottom out special on the British pound! Are the bears ready to give up on the Brexit trade?!
It was a big fail for Cable bears this past year as they took three shots at the 1.2000 – 1.2100 support area and failed! To me this looks like a triple bottom and with the latest upside breakout this week across Sterling pairs, it looks like the “neckline” around the 1.2800 is finally breaking.
It’s a little too early to tell whether this is a legit upside breakout or fakeout, but if there is a fresh bull move ahead, the next resistance area isn’t likely to come until the major area of interest just under the 1.3500 major psychological handle is tested.
And we can’t rule out a bear move at this point because of the current geopolitical situations like Brexit to draw in risk-aversion sentiment into the Greenback. So if the neckline does hold as resistance, look for the bears to take back control quickly and possibly give 1.2000 another shot…because the fourth time is the charm, right?
On GBP/NZD, not as many bottoming events as Cable above, but the double bottom looks just as effective as a technical buy signal now that it’s broken above the neckline right around the 1.7950 handle.
But I wouldn’t jump in long just yet. I see a divergence between price action and the stochastic indicator, with the market making higher “highs” but the stoch making lower highers.
This could mean a pullback lower is just ahead, and if the neckline is retested, that could be the better buying opportunity. Of course, if the neckline doesn’t hold on a potential retest, the bears could be back to take control and continue to play the longer-term trend lower.
Which ever setup you take, remember that risk management comes first! Good luck and trade safe!