Hello Forex Trader,
What is going with the EURUSD and GBPUSD? Today’s article is focused on these 2 majors, but we do hope that you enjoyed Monday’s view on USDJPY and AUDUSD and yesterday’s article on EURJPY and GBPAUD.
A very interesting break out scenario could be unfolding on the Cable. The bullish rally, which started in July 2013, is now poking through a triangle (black trend lines) to the upside.
The Pound versus Dollar is not only breaking through trend lines but also through the major monthly horizontal resistances and that were grouped together at around the 1.6250 and 1.6330 zone.
Furthermore, it seems to be doing this convincingly: the month of November was a bullish candle with a close near the high, indicating that there was little selling pressure at the end of the month as the bulls kept full control.
WEEKLY BREAKOUT TARGET
What could the target be of such a breakout?
It is early in the game as price is in fact just peaking through these levels. The next resistance levels however are the tops of this weekly chart at 1.6750 and 1.7050 (red lines).
Especially the 1.6750 top could be of huge importance. A break of that level would invalidate the development of a bearish triangle. Till that moment, price will most likely move up to challenge that top.
If we zoom in to a lower time frame, such as the 4 hour chart, any pullback to the broken weekly resistances has a high probability of now acting as support. Also when placing Fibonacci retracements on the charts, we are able to find out that those support levels correspond with the 38.2%, 50% and 61.8% Fibonacci retracement levels, which all could provide support. Another element to consider is the uptrend channel (blue) which seems to work well as a guideline for this uptrend.
From a monthly perspective the EURUSD is midway a wedge and the price action of 2013 has been tremendously slow. The month of November itself turned out to be a Doji for the monthly candle, albeit with a bigger tail from the bottom and from the top. This indicates the selling pressure at the start of the month, but subsequent uptrend as well.
The weekly perspective shows the EURUSD from a different light. From this perspective the EURUSD is in an uptrend:
1) The weekly chart is showing higher highs and higher lows.
2) Price could also be placed in a decent uptrend channel (blue).
3) The upper, low and middle channel lines are well respected by price.
How far could this trend go?
a) There is still plenty of space to move higher and retest the top of the monthly wedge lines (purple), for instance.
b) There are also Fibonacci targets that still are open such as the -618 at 1.3870.
c) A break above that level could mean that price has enough steam remaining to progress towards the 78.6% Fibonacci retracement and the -100% target confluence at 1.43.
However, the pace of price is far from an impulsive move so any trend continuation could see many ups and downs (choppiness) before reaching its destination.
The alternative scenario is that price would break out of the uptrend channel. In that case the analysis would have to change and a reconsideration of the uptrend would most likely be needed. A break of the bottom at 1.33 could mean a retest of the bottoms at 1.2750.
Thanks for sharing this article and wish you Good Trading!
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