Thursday, July 23, 2009

Watch This Market




I've been following the British Pound very closely over the past few weeks and I think we are about to see a move take place. Above is a daily chart of the ETF for the British Pound (FXB) and in the lower pane is the ADX indicator. Notice how low the ADX is right now, it's below 15. If you look at the price action you will notice a solid line of resistance taking place at around the 166 level. If you look even closer at the arrows that I placed on the chart, you will notice that the lows are getting higher which tells me that buyers are entering the market. This is is similar to an ascending triangle chart pattern.

I think if the pound can close above the 166 level, that may be the beginning of an up move which might be rather large due to the 8 year cycle that dominates this currency's trends. Take a look at a long term monthly chart of the British Pound (not shown) going back 30 years and you will notice a very dominant 8 year cycle of lows which has been very accurate. In my opinion I believe that an 8 year cyclical low has been made. Only time will tell if I am right but for now I'm going to just trade what I see and let the market dictate if I enter long or not.

5 comments:

Mike Truong said...

Kevin,

Thanks for the chart. I looked at the historical chart of usd/gbp which I think is what FXB appromimate and what I see is a low was made in June 2001 leading to a high in nov 2007. I think we have a possiblity to 1.71 or 171 on FXB before we pause for a test. i don't doubt that it is possible to head to 181 area but we will run into a wall of resistance. maybe you can post the monthly chart that show the 8 year cycles. My chart only go back to 1999 unfortunately

Kevin said...

Hi Kevin,

Very interesting - it would be useful to know if the COT data supports an upside breakout. I will be looking for that data tomorrow myself.

Kevin

Anonymous said...

Kevin,

What do you think of USD/CAD and CAD/JPY?
What are their cycles?
Thanks!

frank said...

I second that request for USD/CAD

Anonymous said...

i think the pound is going down.see the subtle head and shoulders

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