Chart Of The Day: Pound’s Slide Offers A Buying Dip
Investing.com | Dec 17, 2019 13:50
The pound’s current decline may be nothing more than a pullback within a rally.
Sterling fell for the second day after UK Prime Minister Boris Johnson said he would introduce legislation to outlaw any further Brexit delay beyond 2020. The same market that advanced on the foregone conclusion that the 2016 Brexit vote would fail and then plunged after the shocking Leave victory is now selling off on the increased possibility of a hard, no-deal Brexit.
Yesterday’s drop followed the UK’s worst manufacturing data in over seven years. From a technical perspective, negative fundamental events such as this provide the optimum timing for profit-taking: in this case, the pound had completed a bullish pattern at 1.3000 and the U.S. announced its desire to enter a trade deal with the UK.
We wrote a post around two weeks ago about the pound’s H&S continuation pattern. The only worry we have is a resistance at the 1.3400 level, the March peak and the highest price since June 2018. Strictly speaking, the uptrend since the September bottom was extended when it posted a higher high on Friday, above 1.3500. However, we would like to see the price gain that milestone on a closing basis, as well.
A return move occurs in roughly two-thirds of breakouts. Therefore, this selloff doesn’t alarm us, especially as it's within an uptrend, after a golden cross underscored the bullishness of the H&S continuation pattern.
h2 Trading Strategies/h2Conservative traders would wait for that close above 1.3400 before committing to a long position, while not shorting in an uptrend.
Moderate traders would be content with evidence of support at 1.3000 to enter a long position.
Aggressive traders may enter a long position at will, providing they have worked out their entries and exits before entering the position and providing that it offers a minimum 1:3 risk-reward ratio, to justify the risk.
Trade Sample
Get The App
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.