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29 Oct 2014
GBP/USD may be shaping up for a squeeze - TDS
FXStreet (Bali) - According to Shaun Osborne, Chief FX Strategist at TDS, GBP/USD technical patterns look positive for a potential squeeze higher near term.
Key Quotes
"The recent turn up in GBPUSD is catching a little more attention with price action looking potentially positive on the short-term charts. Firstly, Cable is testing three-month trend resistance off the July high at 1.6150 today (the 40-day MA lurks just above at 1.6184– versus today’s high of 1.6183)."
"Secondly, the rebound from the October low may be forming an inverse Head & Shoulders reversal, the neckline of which (1.6157) today’s push higher has also tested. The formation suggests upside potential of around 330bps on a break higher—implying scope to near 1.65 on a break out from current levels."
We think long GBPUSD positions are worth considering in the event of a clear move through 1.6185 (above the 40-day MA, rather than the neckline trigger, in other words) over the next 24 hours (buy on a stop entry basis at 1.6205). A pop higher in Cable fits with the generally less constructive, near-term outlook for the USD we have outlined recently after the extended rally since mid-year"
"But we would use a tight, trailing stop (1.6165 initially) as seasonal trends do turn more adverse for the GBP through early November and if the seasonal effet if small, it is consistent (GBPUSD has weakened 70% of the time in the month of November in the last 20 years)."
Key Quotes
"The recent turn up in GBPUSD is catching a little more attention with price action looking potentially positive on the short-term charts. Firstly, Cable is testing three-month trend resistance off the July high at 1.6150 today (the 40-day MA lurks just above at 1.6184– versus today’s high of 1.6183)."
"Secondly, the rebound from the October low may be forming an inverse Head & Shoulders reversal, the neckline of which (1.6157) today’s push higher has also tested. The formation suggests upside potential of around 330bps on a break higher—implying scope to near 1.65 on a break out from current levels."
We think long GBPUSD positions are worth considering in the event of a clear move through 1.6185 (above the 40-day MA, rather than the neckline trigger, in other words) over the next 24 hours (buy on a stop entry basis at 1.6205). A pop higher in Cable fits with the generally less constructive, near-term outlook for the USD we have outlined recently after the extended rally since mid-year"
"But we would use a tight, trailing stop (1.6165 initially) as seasonal trends do turn more adverse for the GBP through early November and if the seasonal effet if small, it is consistent (GBPUSD has weakened 70% of the time in the month of November in the last 20 years)."