GBP:USD Swing Trade Analysis For November 2011

GBP:USD Swing Trade Analysis For November 2011

I promised to post up some analysis for Cable this weekend in view of a planned swing short, however, on closer inspection defining the entry will not be quite as clear cut as originally expected on a risk Vs reward basis.

Following previous analysis where Cable was heading towards resistance in the 1.5980 zone we have seen a continuation of that rally which has now extended itself to  the 61.8% fib retrace as shown in the chart below.

I did actually short Cable near Friday’s highs but now plan to cover this position (unless it collapses tonight) as I now feel that probability lies in an extension to the 1.6200 area before a proper retrace.

Price is currently testing the daily 200MA and I don’t believe for a minute that price can simply slice through this area and continue it’s rally, but 100 points or so higher should have things looking overbought enough to enter a swing short with a minimum retrace target of 1.5980 as that level should now become support again.

Daily chart paints the picture:

For the Weekly chart I have long held the view that any continuation of the Macro down trend cannot take place until price has tested the Weekly 200MA which means that in the medium term price is likely to be hanging around this area for a little while before the next major directional move begins.

This opens up the potential for some great range trades to come where the ability to correctly define support and resistance will be a great tool in your trading artillery.

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