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Technical analysis: GBP/USD (17.01.12)

Even a cursory glance at the daily chart of the GBP/USD exchange rate, will confirm what most of us already know, the British pound is continuing its steady decline against the US dollar. Since the middle of August 2011 it has lost about 7% of its value against the US currency.

Click to expand image

The Ichimoku Kinko Hyo chart confirms our suspicions. After GBP/USD dropped below the Ichimoku cloud on 5 September last year, the bulls have only managed to push it above the cloud for a few days, between 25 October and 14 November, but it soon slipped back and since then it has been downhill all the way.

The British prime minister’s refusal to sign the European debt restructuring deal in December 2011 did nothing to stop this trend.

Right now the GBP/USD exchange rate is well below the Ichimoku cloud. It is also below the blue Kijun Sen line and the red Tenkan Sen line. The green Chinkou Span is situated below the price of 26 periods ago.

All of this confirms that we are in the grip of a bear run against the pound, which is unlikely to change soon. So far, the price has failed to break through the low of 1.52708 we saw on 6 October last year. When this happens it should be a good entry point for a medium-term short trade.

Anyone going long on the pound right now is very optimistic indeed, except day traders of course, who can always make use of short-term spikes to make a few dollars.

Published: 17 January 2012

You should under no circumstances consider the information and comments provided as an offer or solicitation to invest. This is not investment advice. The information provided is believed to be accurate at the date the information is produced.

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