Head And Shoulders Pattern On Cable – Technical Update

Cable has printed a complex head and shoulders formation, beneath the key 1.6500 resistance level, and the pattern triggered yesterday afternoon.  This came after the trend line break we identified earlier this week had triggered short and moved into consolidation mode; anyone who entered after the breakout, and held on during the subsequent pullback, was rewarded for their patience . 

The attached chart shows how price tested the broken trend line and how this peak has finally transpired to be the right shoulder of this price pattern.  Further analysis follows below.

GBP/USD 4 hour chart

• Trend-line retest at 1.6572 formed the second shoulder and would need to be surpassed in order to invalidate the pattern.
• Projection from the trigger line comes in around the 1.6270 area which is the top of a price pivot range support level from 1.6215 > 1.6270.  Cable could see further consolidation at this level, if hit, and there is potential for a reaction higher from there.
• Any move back up to 1.6445, the complex head and shoulders neckline, could potentially see support become resistance.  It is not unusual for this type of setup to retrace to the breakout area – taking out the stops- before a continuation lower.
• ADR over 60 days is 142 pips.  Yesterday came in at 168 pips.
• Current daily range of 45 pips is 31% of ADR.
• The drop in gold, which we forecast earlier this week, could be supporting the stronger dollar.
• Price (1.6375) is currently located at the 50% retrace of 1.61102 > 1.66175 which has provided a minor intra-day reaction.
• The daily time-frame candle from yesterday, with a bearish close near the range lows,  is hinting at further downside yet to come.  A retrace higher  before further decline is not unusual though.

No related posts.