GBP/USD Finds Double Top, Selling Off to Uptrend Line Support
The GBP/USD is currently selling off sharply on the heels of a weaker-than-expected Manufacturing PMI number. At 4:30am EST it came in at 49.7 versus the 51.5 forecast. It was interesting that the negative data certainly accelerated the move lower (B) but the weakness and the shift in trend came earlier at between 4:00am to 4:14am EST (A). Prices are currently trading inside the Forecast Region of 1.6220 to 1.6170 (C).
The Continuation Pennant chart pattern on the 60 minute chart identified the weakness that began with a top at the uptrend resistance line (A). But, was there any way to identify or confirm and set up a trade there as well?
Remember that the 60 minute time frame is representative of short term intraday psychology. This chart pattern began only at 5:00am August 31st - the Length of the chart pattern was only 20 candles. This makes for a short term look at the current psychology. However this was perfect in terms of reacting to the economic data release. Now that prices have adjusted as the data is digested, the short term reaction of an economic data event gives way to the overall direction of the trading day.
On a more current alert, a continuation triangle emerging chart pattern, also from the 60 minute chart, reflects a longer look back dating back to 8:00pm EST August 26th. Here the pattern length is 67. It is very clear to see that the top of the continuation pennant is a touch point (S) on the horizontal level of this continuation triangle alert.
The horizontal resistance level (S) is sitting at 1.6375 and the prior touchpoints (R) are at 1.6381 and 1.6377. This set of touchpoints makes for a soft ceiling as there is more than five pips' variance between the different highs. Nonetheless, at only six pips' variance it is certainly a strong ceiling.
Both these chart patterns shared this important high (S) but it's the larger formation that gave the high better context. The current setup is to look for a breakdown through the uptrend line (T) for more weakness.
Even though this is a sideways pattern the Initial Trend reading (U) is highly reflective of how far and fast prices have come. You will notice that it's over 120 pips. The breakdown should be taken if prices are able to take out both the uptrend line support (T) and the 1.6200 level.
For further information on this and other chart patterns visit www.autochartist.com
The Continuation Pennant chart pattern on the 60 minute chart identified the weakness that began with a top at the uptrend resistance line (A). But, was there any way to identify or confirm and set up a trade there as well?
Remember that the 60 minute time frame is representative of short term intraday psychology. This chart pattern began only at 5:00am August 31st - the Length of the chart pattern was only 20 candles. This makes for a short term look at the current psychology. However this was perfect in terms of reacting to the economic data release. Now that prices have adjusted as the data is digested, the short term reaction of an economic data event gives way to the overall direction of the trading day.
On a more current alert, a continuation triangle emerging chart pattern, also from the 60 minute chart, reflects a longer look back dating back to 8:00pm EST August 26th. Here the pattern length is 67. It is very clear to see that the top of the continuation pennant is a touch point (S) on the horizontal level of this continuation triangle alert.
The horizontal resistance level (S) is sitting at 1.6375 and the prior touchpoints (R) are at 1.6381 and 1.6377. This set of touchpoints makes for a soft ceiling as there is more than five pips' variance between the different highs. Nonetheless, at only six pips' variance it is certainly a strong ceiling.
Both these chart patterns shared this important high (S) but it's the larger formation that gave the high better context. The current setup is to look for a breakdown through the uptrend line (T) for more weakness.
Even though this is a sideways pattern the Initial Trend reading (U) is highly reflective of how far and fast prices have come. You will notice that it's over 120 pips. The breakdown should be taken if prices are able to take out both the uptrend line support (T) and the 1.6200 level.
For further information on this and other chart patterns visit www.autochartist.com
- 1 September |
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