The pound dollar retreated into its shell ahead of the new year, largely promoted by an isolated pivot high on the 19th December 2012 at the 1.6306 price point which mirrored the previous reversals of mid September and early May, thus creating a solid resistance level, as a result.
The pair duly sold off, ahead of the holiday season, with sellers entering the market and testing the 1.6100 level. However, the last trading day of the year saw the British Pound recover its bullish momentum once again, ending sharply higher with a wide spread up bar and closing 2012 at 1.6262. This bullish momentum has been reflected in early trading on the first day of 2013 with cable once again climbing to test the 1.63 region and at the time of writing is trading at 1.6297, having opened gapped up at 1.6329.
The key, of course, will be whether the pair can breach this level and, if so, then expect to see a sustained move higher for cable with the price action building on a solid platform of support at 1.63.
Moving to our volume (market activity) indicators, despite the selling on the daily chart, pre Christmas, buyers have now returned and look set to provide higher buying volumes in today’s trading session. In the meantime the 3 day volume has temporarily reverted to congestion and for any sustained move higher we need to see this too transition back to green.
Looking at the daily trend we can see that this has also transitioned from bullish to congestion but the three day trend has remained firmly green throughout, confirming the bullish picture for the longer term.
In summary, provided we see a clean break and hold above the 1.63 price point there is no reason to suppose that cable will continue to move to test the 1.66 high of 2011 or even the 1.6750 area, earlier in the same year.
By Anna Coulling