For the British pound, the new year brought little respite from the heavily bearish picture which continued unabated for much of January, against the backdrop of global equity markets in a temporary swoon as Chinese data continued to disappoint. The trend lower has seen Cable shed over 1000 pips in rapid time, moving from the volume point of control in the 1.5100 region, to ultimately trade at a low of 1.4079 on the 6B March futures contract, before finally finding some much needed traction last week. The driver for much of this move has been weakness in sterling, as opposed to strength in the US dollar, which itself continues to struggle to break through the 100 region on the dollar index chart. In fact it has been the continuous stream of weak fundamental news for the pound that has helped to drive the pair ever lower in early 2016.
However, that said, for volume traders, the stopping volume of the 19th January was a clear signal of insider buying, with the narrow spread price action and ultra high volume telling its own story, and the first sign that the bearish trend was reaching a pause point, and possible reversal on the daily chart. Indeed the volume of the 19th was the highest for several months, and since then the pair have rebased around the 1.4150, to currently trade higher at 1.4368 at the time of writing, with this morning’s GDP release providing further impetus to the rally higher. From a technical perspective it is the high volume node which now awaits in the immediate area above at 1.4370 that is likely to hinder further progress higher, but should this be breached, then a move to test the low volume region at 1.4500 becomes increasingly likely.
By Anna Coulling
Charts from NinjaTrader and indicators from Quantum Trading