On the daily chart of GBPUSD, price is moving inside a down trending equidistant channel. Besides that, we can also see that price is doing a “Lower High” and “Lower Low” each time marked in the chart shown above.

Currently, price is near the equidistant channel top which might offer some resistance.

At the moment, we don’t see any obvious turning point yet on the daily chart as marked in the orange flow. (Turning point refers to either a “V” shape or a “U” shape)

Let’s examine one step down to see what’s happening in the orange flow and see if we can look out for any clues in the H4 chart.

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On the Four- Hourly chart of GBPUSD, price is now moving inside the up trending equidistant channel (in green).

Price is now near the equidistant channel top and also at the Weekly Resistance level circled in the chart in green.

Next potential resistance to look out for would be the Monthly Resistance level at 1.5265.

However, to have a “low-risk trade” would be to go long when price is being supported at the bottom of the equidistant channel or with confluence of market level.

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Big moves in the major pairs and crosses were made between Thursday and Friday (26 – 27 Nov 2009). This is a worthy incident to look at and learn from. Lets recall the incident:

• The pairs involved made moves that exceeded their usual daily range
• They show a sudden return of risk aversion
• The Japanese finance minister used the word ‘abnormal’ to describe the market
• Analysts quickly associated the move with stock market sell-off in Dubai; some said it is a blip while others say it ‘has legs’

From a technical point, there are signs of a risk aversion move in currencies prior to the sell-off but the charts also show confusion.

Let’s look at the GBPUSD.

1. A fall in the GBPUSD is a risk aversion move
2. Sterling was resisted by a 6-month level at around 1.67~
3. From the day chart we can see at least two failed attempts to break out
4. By Thursday 26 November 2009, GBPUSD was resisted and suggested a right shoulder of a Head and Shoulder chart pattern
5. The Head and Shoulder chart pattern is usually read by chartists as a reversal pattern
6. This chart pattern can be clearly read in the 4-hour chart
7. By Friday, price has fallen through the ‘neckline’ on the 4-hour chart; falling below the neckline is a confirmation of the validity of the pattern
8. However a long tailed doji or ‘hammer’ look-alike candlestick quickly reversed the move and the neckline was unable to serve as resistance
9. The day chart shows what looks like a failed break

In other words, was there a true panic and reversal? Has this been replaced by regret and remorse?

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CNBC 27 Nov 2009 – Dubai Debt Woes ‘A Blip’, Won’t Lead to Global Fallout: Strategist

CNBC 27 Nov 2009 – Dubai Stock Market Fear Has ‘Legs’: Dennis Gartman

Marketwatch 26 Nov 2009 – Japan finance minister: forex moves ‘abnormal’

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Strong resistance for Sterling

Was this a breakout? Is it a bear trap?

The Aussie dollar may have found a stronger support level at its 23.6% retracement (0.6900) than its European and British counterpart.

Despite the rally in the dollar last night, the Aussie encountered its support and held. The EURO and the Sterling on the other hand fell through to touch the next retracement value at the 38.2%. It may not be wishful thinking to see the Aussie attempt the March 2009 high were positive momentum were to remain.

Aussie find support at 0.6900

Euro falls to next level