After riding the wave of the weaker Dollar, the British Pound may have temporarily reached the end of its rally this morning.
After riding the wave of the weaker Dollar, the BritishPound may have temporarily reached the end of its rally this morning. In lighttrading, the GBP USD attempted to continue its almost month long rally with adrive through a major 50% level, but this move was thwarted by the lack ofbuyers.
Short-traders and profit-takers seemed to have jumped on thechance to refresh their positions and exit longs respectively shortly after themarket pierced the 50% price level of a major range. Based on the break from1.6618 to 1.5271, a key 50% retracement level was created at 1.5973. Thismorning’s breakout above this level to 1.5999 and subsequent break back underthe 50% price has put the market in a position to form a daily closing pricereversal top.
A closing price reversal top doesn’t mean the trend haschanged, but it often indicates the start of a 50% retracement of the lastrally. This corrective move often lasts 2 to 3 days. Given the current rallyfrom 1.5271 to 1.5999, a closing price reversal top could trigger a retracementback to 1.5635 to 1.5549 by Wednesday. In addition to this retracement zonetarget, traders should watch for a possible technical bounce following thefirst test of an uptrending Gann angle at 1.5751.