I’ve been writing about the Cable’s movements all year. You can get up to date by reading my previous posts: here
In my last few pieces I’ve been keeping an eye on the monthly chart which you can see above. I had talked about how the monthly 200MA had acted as a cap in 2009 and 2011 and wondered if it would happen again in 2014. Well now that the Feb candle has closed we can see that for the first time that the price has closed above the 200 MA since April / May 2011. What happened then? Well see the chart below.
The Downward arrow in the above chart shows how at the end of April 2011 the GBPUSD closed above the 200 MA (@ 1.6707). So far so good. However you cal also see that it failed to hold above that level and in fact slid back to a low of 1.5270 several months later. So even though the recent close is a bullish sign….its the old saying of one swallow doesn’t make a summer (or something like that). I’d like to see continued closes on a weekly and monthly basis above the 200 MA to confirm continued GBP strength for the remainder of the year. The difference between 2014 and 2011? Well I’d say the UK economy is deemed to be in a stronger position than back then. Furthermore the global economy (Ukraine withstanding) has been ‘mostly’ positive whereas in 2011 we were still talking about double or even triple dips in the UK and global economy as valid risks.
Lets have a quick look at the daily chart.
You can see that on the Daily chart the Cable has itself in a nice little upward channel. It recently made new highs whilst also bouncing off the top of the channel and printing a bearish pin bar. If price closes back below the 1.6580 support zone then I’d expect a re-test of the base of the channel. As always we just wait and watch and trade what we see.