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The strength in the British Pound over the past three weeks has been impressive. On Thursday Cable broke above the 7th square root progression of the year-to-date low to trade to its highest level since early February. However, our cycles suggest the medium-term trend is getting a bit “long in the tooth” with an idealized turn window seen around the middle of next week. Several key resistance levels including the 1x1 Gann angle line drawn from the year’s high, the 61.8% retracement of the year-to-date range, the measured move of the March to May advance and the 8th square root progression of the year’s low all converge between 1.5760/90 and this zone now looks like a natural potential stopping point for GBP/USD in the days ahead.
Further bolstering the case for a turn of some sort materializing next week is the volume profile in the pair over the past few days. Data from a multi-bank platform we monitor has revealed declining volume over the past few days while the rate has achieved new multi-month highs. Such diminishing volume in an advance is a pretty clear sign of a weak trend and improves the prospects for a top as we near the cyclical turn window next week.
GBP/USD Daily Chart: June 13, 2013
Charts Created using Marketscope – Prepared by Kristian Kerr
Upcoming Event Risk:
Source: DailyFX Calendar
LEVELS TO WATCH
Resistance: 1.5760 (Gann level), 1.5780 (Measured move)
Support: 1.5585 (50% retracement of YTD range), 1.5500 (Psychological)
STRATEGY – Next Week Sell GBP/USD
Stop: Close above 1.5805
Target 1: 1.5585
Target 2: 1.5500
--- Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com
Looking for other ways to pinpoint sentiment extremes in the British Pound in real time? Try the Speculative Sentiment Index.
To contact Kristian, e-mail firstname.lastname@example.org. Follow me on Twitter at@KKerrFX.