Good day traders!
I have always believed that it is important to plan your trades for the week and one of the most important activity to do during the weekend is to actually go through the longer term charts like the daily and weekly chart. They are very relevance and can help you in understanding the underlying trend for the particular market.
Looking at the weekly chart of the pound dollar, we see that the pair have closed positively this week after a correction last week with the 100ema acting as the main resistance as seen on the chart.
Although stochastics and macd is showing overbought indications, I usually do not give too much weight to these 2 lagging indicators and base more of my analysis on actual price action.
The pair have made a higher low around June this year and is still heading higher. The previous low was made during the 1st quarter of 2009, just a few months after the financial meltdown. With the UK posting positive GDP figures and the most recent news looking favorable over the mid term, I believe that the pair is on its way to test higher grounds.
So what are the price targets you may ask.
(1) I believe that based on the charts, that the price will target the longer term 38.2% fib resistance at 1.643. We might encounter some resistance there and a correction might take place. That should be healthy in a steady up trend.
(2) The next resistace level is at 1.6649, the fib level 127.2 based on the current up trend taken from 1.4232. I think there is going to be some resistance here that might even bring the price back down to 1.63 region.
(3) A successful weekly close above the 1.6649 level will allow us to see the pair heading towards the 1.7306 level, the 161.8% fib level.
(4) A very bullish pound will allow us to hit the 1.75 level before we see a bigger correction for the pair.
On the downside,
(1) A clear break and closing below the 1.54 level (Previous Support) will open the doors for lower grounds.
All in all, I am bullish the pound and I will be contemplating going long.
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