Two of my best performing trades of recent years have been long cable trades so I’m probably not the most objective person to listen to. I am bullish the GBP against all of the other majors and I have no fundamental reason for it apart from ‘it feels very oversold to me’. GBP/JPY has broken important support but failed to close below it. EUR/GBP has I feel put in a major top and has room to move back below .80.
The 200-week MA in the cable is at 1.8150 so we are currently 15% below that level, surely a good sign of an oversold market. The market is currently moving in a bearish consolidation pattern between parallel trend lines with parameters at 1.55/1.68 approximately. As we are towards the bottom of this channel, this suggest ‘oversold’ to me also.
If we are in a new downtrend then this analysis will soon prove to be wrong. If on the other hand we start getting strong daily chart lows on cable and GBP/JPY close to these pivotal 1.55 and 139 levels, then be ready for a very sharp bounce.