An interesting day for cable yesterday which initially opened the trading session gapped down, following Friday’s downgrade, before ending the session as a relatively wide spread up candle closing back above the 1.51 level at 1.5161.
Whilst this is the first positive signal for sterling for some time, sadly one swallow does not make a summer as the outlook for cable still remains heavily bearish.
This was further reinforced by yesterday’s price action with the posting of an isolated pivot high on Friday’s down candle at 1.5322 and likely to add fresh downwards pressure.
Indeed, price action this morning continues to look weak with the pair having tested the 1.52 area before falling back to trade, at time of writing, at 1.5157.
Moving to our other indicators, the heat map remains heavily bearish and has been so since mid-January, with the trends in both time frames and volumes also reflecting this heavily negative sentiment for the pair.
Yesterday’s daily volume was higher than average and also reflected a modicum of buying, but this is unlikely to signal anything other than a short term reversal before the longer term downwards trend for cable continues. In addition the USD index is also breaking out through a key technical level – in the 81.60 area and should this continue then further dollar strength looks increasingly likely.
By Anna Coulling
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