GBP/USD Weekly Candle Chart - January 26th 2009

GBP/USD Weekly Candle Chart - January 26th 2009

As it’s the start of a new week, let’s begin with the pound dollar weekly chart and see what we conclusions we can draw from looking at a longer time frame, and remember to use the long timescales for your direction, and the shorter time frames for you entry and exit points. In virtually all our trading we are either looking for confirmation signals of a move, or alternatively we are looking for turning points which may be signaling a change in direction. The key areas I would highlight would be as follows. Firstly note the classic turning point of three candles, and up bar, followed by a shooting star, and finally a down bar, which confirms the direction. Since November we have had a long period of consolidation, with resistance being created at the 1.4500 region, and resistance at the 1.5300 area. The down candle of last week confirmed the breakout to the downside with the support level of 1.4500 now becoming resistance to any move back up. All the moving averages are intact and we now need to wait for further signals to confirm the bearish momentum.

GBP/USD Daily Candle Chart - January 26th 2009

GBP/USD Daily Candle Chart - January 26th 2009

Now let’s look at the daily chart. The pound dollar currency has many similarities to the euro dollar pair at the moment which makes it extremely difficult to trade in the short term. Following a long period of consolidation from November to the middle of last week, the GBP/USD currency pair traded in a range between 1.55 and 1.45, a level which was finally breached last week with a sustained breakout to the downside on Tuesday, which was subsequently followed by three doji candles. On the daily chart, and of particular significance is Friday’s candle, a hammer, which suggests a possible reversal in prices in the short term. The 9 day and 14 day averages have crossed and the 40 day moving average is turning lower. For intra day traders attempt small long trades.

The short term outlook is sideways, with the medium to long term bearish.