Thursday, September 17, 2009

GBP/USD Harmonic Balance Range



GBP/USD Daily chart is a little puzzle for me and that's why I'm challenged to rationalize the current price action.

The Pound has spent last 3.5 months in roughly the 1.61 - 1.67 range with a down overshoot to 1.58 In June and Up-Overshoot to 1.70 in Aug.

So this makes a balanced price distribution in a 600-pip range (1.61 - 1.67) with 2 equal overshoots which also equal 1/2 of the middle range (300 pips: 1.58-1.61 & 1.67-1.70).
NOTE: Here is a rough range figures and this is an attempt to analyze the distribution of the price within the ranges which I'm just experimenting with.

So right now we are standing at a pivotal area defined by the 21-Day MVA at 1.6416.

So Since today we have a small inside, tight range day - that means tomorrow we either accelerate or retrace and resume uptrend. I can see these 2 scenarios:

1. Bearish case:
- the 21 / 55 Day MVA Dead Cross
- 09/11 was a Grave stone Doji + Rejection off the Upper range area + confirmed by 2 consecutive down days.
- trigger for an acceleration will be a breach and close below the 55 DMA/1.6450 & 21 DMA/1.6416

2. Bullish case
- since Start of September we are in a sequence of higher highs / lows
- the last 3 down days actually made a neat 50% retracement of the 1.6114 - 1.6740 move (50%=1.6426)
- today's Low is higher than yesterday's and above the 21-DMA
- rising 89-DMA at 1.6349 - held the downtrend and the reversal in the start of this month - now it runs above the 09/07-08 Lows at 1.6321/25
......................................
However I feel again like I'm trying to pick a side instead of objectively analyzing the chart. One clue to the puzzle might be the outright break above the 200-DMA in EUR/GBP which promises relative weakness in GBP compared to EUR.

this means if EUR/USD now pauses at 1.4735 and retraces - then the GBP/USD will have an even steeper decline.
However if Euro accelerates thru resistance the pound will also surge but lagging.
On Crosses GBP/CHF is lingering right at the 200-DMA and GBP/JPY is developing today a big Doji pivoting around the Sept 01/02 Lows which might be good for a bounce.

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