For most of 2014, the British pound has traded higher in a relatively tight range to the U.S. dollar. Today U.K. retails sales had a positive surprise with its March reading coming in at 0.1%, much better than the expected -0.4% contraction. The upbeat report provided a small 30-pip move higher to 1.6829 which has already been given back.
Price action on the daily chart shows that price is very much trading with technical chart patterns. Price went from a bullish Gartley pattern right into a bearish butterfly pattern and now is showing a potential bearish ABCD pattern at 1.6862 or 1.6918. If valid, we may see price have one last thrust higher before making a significant retracement back towards the 50-day SMA at 1.6670.
The trade: Sell GBP/USD at 1.6860 with a stop loss at 1.6920 and a take profit at 1.6740. The Risk/Reward Ratio is 1:2.
Edward J. Moya
WorldWideMarkets Online Trading