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Today’s Trading Edge: GBP/USD – Bearish ABCD Pattern Puts Rising Channel in Jeopardy

Posted by Edward Moya on May 9, 2014 6:40:00 AM

WWM GBPUSD MAY 9 2014

Manufacturing Data The bullish channel for GBP/USD that has been in place since last summer may finally be poised for a slide towards major support around 1.6750. Early in London, the British pound failed to produce any positive rallies despite a better than expected output numbers. Manufacturing output for the month of March climbed 0.5%, better than the forecast of 0.3%, but lower than prior reading of 1.0%. Industrial production also came in slightly better than expected at 0.1% verse a forecast -0.2%. The numbers overall were positive, but cable could not produce any rallies.

Price action on the GBP/USD daily chart has formed a potential bearish ABCD pattern that may see a deeper pullback eventually target the 1.6750 area. Critical resistance will remain the 1.70 barrier and traders should not be overly bearish unless we see the 50-day SMA crossover the 100-day SMA. Currently price is still in a strong bull market because the 200-day, 100-day, and 50-day SMA are all trending in order. If a breakdown beyond 1.66 occurs, price may target the 200-day SMA at around the 1.6300 level.

The trade: Sell GBP/USD at 1.6910 with a stop loss at 1.6960 and a take profit at 1.6710. The Risk/Reward Ratio is 1:4.

Edward J. Moya

Technical Strategist

WorldWideMarkets Online Trading

 

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