NOT EXPECTING TRADE TO TRIGGER; BUT WE WILL GLADLY SELL IF IT DOES
Gbp/Usd: We are not inclined to take any positions on the lightened holiday trade and will only establish a trade if it is essentially gift wrapped. Holiday trade can be very tricky and dangerous with the lack of any real volume or liquidity making it easier to push markets in either direction. However, with the USD now showing oversold across the board, we anticipate some material corrective price action into this week. Daily studies in this pair are highly overbought and track well above 70.0 on the RSI. A break back below 1.5755 would now be required to open the door for a potential reversal. Our strategy nevertheless will to be look to sell on a rally to fresh highs rather than on a downside break of 1.5755. Yearly highs have been set by 1.5950 on Friday and we still see scope for a push back above critical psychological barriers at 1.6000. But any rallies above 1.6000 are not seen as sustainable and should the market break back above this barrier today, we will be looking to sell. Strategy: SELL @1.6020 FOR A 1.5500 OBJECTIVE, STOP @1.6220. Stops to be trailed to cost on a break back below 1.5950. Recommendation to be removed if not triggered by NY close (5pm ET) on Monday.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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