Cable has looked quite bullish since bottoming out in April but it looks as though its failure to break through the 50 fib level – 15 July highs to 13 April lows – back in June was a warning that the bullish move is losing steam.
As you can see on the daily chart below, the 89-day simple moving average has been a very good trend indicator for the pair for some time now. Today’s sell-off has broken back below it and, barring a late rally, looks likely to close below.
If we see this, it would suggest the bull run is over and the bears are back in control. It would also create a very bearish candle on the daily chart and, barring a strong rally into the end of the week, a very bearish weekly candle.
Initial support may be found around 1.5450 where an ascending trend line – 5 May lows – intersects prior support and resistance levels.
Offering additional support at these levels is the 233-day simple moving average. While this hasn’t been a reliable support or resistance level during the recent consolidation phase, as they rarely are, it has been at times in the past so could be again.
The 21-week SMA on the other hand has been a reliable support and resistance level over the last couple of years and this could also offer significant support here.
A break below this level would be very bearish for the pair and could signal a move back towards this year’s lows in the coming months.
The next level of support could come around 1.5330 – 8 July lows – followed by 1.5170 – 1 June lows.
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