By: Colin Jessup
The Pound Sterling, or Cable as it is known when traded against the USD is at a critical zone that offers much in the form of resistance. The pair hit a 4 month high today of 1.6000 even but closed lower than opening, forming an inverted hammer candle, which on its own can be a strong indication of a reversal, but the fact that this candle printed where so many resistance barriers connect makes it almost a guarantee. There is a long standing Daily Resistance zone at 1.5960, the Daily Pivot at 1.5964 and a descending trend line which is the upper half of a tighter and tighter wedge formation that started back in October 2011. While looking at a 4-hour chart, we clearly see that price is holding above the Weekly R1 at 1.5694, but there has been little movement in the Pacific trading sessions on this pair, and many beleive the Greenback is ready preparing for a Bullish run, which would drive price action lower. If we can get a close above 1.5960 with some volume we could see this pair aim higher, but until we do the more likely scenario is a pullback to the 1.5850 level. Support levels will be 1.5920, 1.5900 and 1.5860 with Resistance above 1.5980 at 1.6000 and 1.6002.
Interesting Fact: The pound sterling (GBP) traded against the U.S. Dollar (USD) is often referred to as "cable". This term was adopted in the days when the only means of trading communication between London and New York was through the telegraph cable.
Happy Trading!