Last month, I identified a potential bullish Gartley pattern that triggered a major bullish rally that invalidated the bearish channel displayed in red. The overall direction of the U.S. dollar has been lower as expecations remain steady that the Fed will remain accommodative and that tapering is not driving the yield on the 10 year above 3.0%. The next couple of months, may remain rangebound for most of the majors.
Price action on the daily chart highlights the key respect of the 1.6820 level and the formation of a potential bearish Gartley pattern at current levels. If valid, we may see a return to the 50-day SMA at 1.6588. Further downward support will come from the 1.6500 handle. If the dollar rout continues and 1.6825 is taken out, a run towards 1.70 may occur.
The trade: Sell GBP/USD at 1.6750 with a stop loss at 1.6825 and a take profit at 1.6600. The Risk/Reward Ratio is 1:2.
Edward J. Moya
WorldWideMarkets Online Trading