Cable is looking much more bullish since breaking though the 233-day simple moving average a couple of weeks ago and now it faces a key test of its bullishness, with the retest of that key SMA.
When a big support or resistance level is broken, a key test of the quality of the break can be how well it stands up to the retest. If it holds, then the role of this level has changed, in this case that would be from a resistance level to a support. This acts as confirmation of the break and in this case gives the impression that sentiment towards the pair is much more bullish.
So far, the level has survived the first test but that doesn’t mean it won’t face another. The 4-hour chart is showing no sign that the move lower is easing up. Neither the MACD nor the stochastic is showing a loss of momentum at this stage, although the stochastic is potentially in the process of crossing in oversold territory which is a slightly bullish signal.
I would like to see this followed by a move above oversold territory and combined with a reversal setup in price action before I become bullish again in the short term. Further confirmation would then come from a break above the descending trend line resistance, around 1.5750.
If we do see a daily close below the 233-DMA, that wouldn’t necessarily confirm that the uptrend in cable is over, by any stretch of the imagination. There is still significant support just below here around 1.5550 – historically a key level of support and resistance and the 50% retracement of the move from June’s lows to highs.
Until this is broken, the pair remains in a clear medium term uptrend and the flag formation remains valid, which is a bullish continuation pattern.