Cable remains in consolidation mode on Friday having come under extreme pressure during the first three days of the week.
The pair fell below 1.40 for the first time in almost seven years this week and having edged back towards this level since on what appears to be profit taking, it is now finding resistance here. The flag that has formed it typically a continuation pattern and therefore bearish in this case.
While this is a natural resistance for the pair, being a key psychological level, I think we could see consolidation continue and 1.4050, previous support, tested as new resistance.
The stochastic and MACD both support this with neither currently showing signs of upward momentum waning. That of course isn’t to say it won’t and as yet, 1.40 is holding firm.
If we do see a break below the flag, the next significant support could be found around 1.3650 – March 2009 lows – followed by 1.35 – January 2009 lows.