Cable has had a very strong start to the week, up 1.37% as we approach the end of the morning session in Europe. However, I’m not yet convinced it can maintain this momentum with some big resistance levels lying ahead.
The first potential area of resistance comes between 1.5425 and 1.5450 which has recently offered support for the pair. In the past it has also been a key level of support and resistance on a number of occasions.
The 233-day simple moving average may also offer resistance at this level, although it should be noted that it hasn’t been a reliable technical support or resistance as of late.
Of course, with price action having been in a period of consolidation since May, that shouldn’t come as a surprise. Moving averages are more reliable in upward or downward trending markets rather than those in consolidation.
Further resistance could be found above here around 1.5490 where the 50 fib level – 25 August highs to 4 September lows – intersects the ascending trend line – from 5 May lows – that the pair broke below on 27 August.
This will be a key test for the pair as a failure to break above the 50 fib suggests this rally is just a retracement, while a failure to break back above the trend line acts as confirmation of the initial move. This is very bearish for the pair.
Alternatively, a break back above here could be quite bearish, especially if the pair closes out the week above last week’s opening level – 1.5391 – which would create a bullish engulfing pattern on the weekly chart.
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