The rally in cable over the past couple of days has taken it back to the top of the descending channel, where it has run into resistance, experienced divergence and looks to be forming a reversal pattern.
Aside from the top of the channel, 1.5450 represents a prior level of support and resistance, while the 89-period simple moving average also combines here to create a strong barrier to the upside. It is also the 50% retracement of the move from 21 May highs to 1 June lows.
If this reversal pattern – an evening star formation – is completed today with the most recent candle closing more than half way into the last green candle, it would suggest the pair has once again turned bearish.
Initially, that would bring into play the two ascending trend lines around 1.5320 and 1.53. A break of these would in my view confirm the reversal of the trend to the downside. It would also mean the most recent low has been broken.
Beyond here, the next key level for me would be Monday’s lows of 1.5185. Not only is this the most recent major level of support, it’s also previously been a key level of support and resistance, and marks the 50% retracement of the move from 13 April lows to 14 May highs.
Moreover, a break of this level would mean a break of the 55 and 89-day SMAs, which would suggest sentiment has once again become very bearish in the longer term on this pair.
Open Position Ratio
Historical Position Ratio
*The above tools and many others can be found in OANDA Forex Labs.