Tuesday, March 08, 2011

British Pound - Was Last Week A Bull Trap

Above is a daily chart of the British Pound and in the lower panel is the MACD indicator. Last week the British Pound made a multi month new high and appeared to have broken out but as of this writing that breakout may have been a trap for the bulls.

As you can see the uptrend line is CLOSE to being broken.  When we have a  day's range which is completely BELOW the trendline, that in my opinion would be confirmation that the uptrend line has been broken. You'll notice last week when the British Pound made a new high, the MACD made a lower high establishing a bearish divergence.

Given that the technicals are beginning to weaken, I think this currency should be on our watchlist for a possible short.

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