the GBP vs USD is about to test a 30 year trend line … I M P O R T A N T test

1/2/2016 – Pound is flirting w/ a 30 year trend line . this is going to get very very interesting.

note, when drawing the trendlines I did the “usual” and connected the lows but also use some higher wicks and the most recent low in 2015 to get a zone where the the important support could come in.  those are the red, purple and black trend lines below.

 

 

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we’ve spent some time in the past blogging about the importance of square roots …their importance is based on musical theory.

after spending way too much time studying the spot currency market, it’s a little known fact that the Pound vs USD “likes” to bounce around the .886 retracement level and, occasionally, the .841.

.886?

square root of .886.

here’s a weekly chart showing the .886 and .841 in action:

even the “minor” bounces caused moves in excess of 600 pips.  so, I like to pay attention to them …

additionally, as you can see above we are approaching a VERY VERY crucial level on the POUND.  It’s about to slam into the long term trend line from 2009 low AND (more importantly) it’s approaching the key retracement level.

so what do we do? step down a level to the daily.

in the daily, we have a LOT going on ….

• 3 drives to a bottom w/ what appears to be a 19 day cycle carving out the 3 drive (hint hint we are 194 (19.4) calendar days from the top)
  • blue arrows
• RSI divergence being shown and key RSI support a little lower
• .886/.841 zones
• some SQUARE OUT’s of PRICE and TIME
  • We went up from the low in April 1364 pips.  working/moving decimal we get 136.4.  136.4 trading days or candles from the top is today.
    • note, I used the ‘breakdown” candle
• fundamental frequency target
  • we’ve done this before and when using the initial impulse move we yield a target of 1.4700 which lands right on the “key” trend line from the 2009 low.
• some “geometry” techniques taught to me by my friend and mentor Mike Jenkins. (www.stockcyclesforecast.com)

as you can see, we have some key areas of support coming in …. now, IF WE LOSE THESE LEVELS (a total possibility) THEN we have a MAJOR MONTHLY PATTERN WORKING OUT that is roughly 800-1000 pips lower.

Not ready to make a trade on it – yet, but here’s a preview. if you’ve been following you’ll see the PATTERN that is forming.

for now, if you decide to play the daily/weekly pattern working right now THEN use a close stop.  I’m going to nibble long ….but after the first 3 wave move up plan to exit.

B