An interesting technical picture for cable on the daily chart which has seen the pair surge higher in early trading today, and currently testing (at time of writing) the 1.5330 price point. With many having forecast the demise of sterling, the recent recovery has come as something of a surprise, with the pair testing and finding support in the 1.4850 region, before surging higher largely as a result of US dollar weakness and the inability of the FED to clarify their position on QE.
Last week’s price action was a precursor to today’s breakout with a series of higher lows posted on the daily charts resulting in a very pretty pennant formation and sending a strong signal of bullish intent. This duly arrived this morning with cable breaking through the yellow dotted line at 1.5280 and provided the price action continues to hold well above this price level, then we should see some further upside momentum in the short to medium term.
Moving to our volume indicators, here too the yellow dotted line defines the upper limit of what is now a deep and sustained area of price support, which should provide a solid platform for a move beyond this region, for a possible test of 1.54 and beyond in due course.
The only slight concern is the associated volume of the price action towards the end of last week which saw rising prices accompanied with falling flow, which can be a sign of weakness. However, provided today’s price action is supported by above average flows then all should be well for cable bulls.
By Anna Coulling