Will the British Pound Break to Multi-Year Highs? – Friday 25 Oct 2013 (21:46)
Great question from Steve in the UK about the British Pound:
“Hi Barry, Thanks for the Weekend chart round-up and, indeed, for all the work you share with us.
Sterling, though strong since bottoming in the summer (and quite possibly destined higher), is still – on a weekly timeframe – stuck in a multi-year range with support in the high 1.40s and resistance in the low-/mid-1.60s. Indeed, as of this writing it has yet to clear its year-end 2012 high and could, until proven otherwise, be argued to be putting in a double top. Can it really be right to talk of a new uptrend on the weekly timeframe until we get above this multi-year resistance? What am I missing?
Thanks once more for all the great work you put out. Best regards, Steve”
I’ve argued that the British Pound is in an uptrend and likely to break to multi-year highs. In the video I try and explain why:
- The more time we spend in congestion the more likely we’ll get a trend break
- We’ve had Exhaustion selling volume on the weekly chart and put in Bullish divergence at the beginning of June 2013
- Moody’s downgrade of the UK in February 2013 led to Professionals buying the Lows around $1.50
- We’ve broken weekly Resistance and not seen Professionals taking profits or Exhaustion buying volume yet
The essence of trading is what to do at the top or bottom of a channel. If we reach the top of a channel, do we buy it in anticipation of a breakout into trend or do we fade it expecting a collapse back into the channel. Vice versa at the bottom of a channel.
How do you know when the trend break will work or fail?
And for me the answer is in the ‘Better’ indicators. A valid upside break will have:
- End of Trend signalling at the Lows followed by some cyclical activity
- Exhaustion selling followed by Bullish divergence and Momentum close to the zero line
- Professional bars buying the Lows and maybe jumping the creek
- Once we’re above cyclical Resistance then the trend move is on
Good luck with your trading.