Technical Analysis of GBP/USD
Even a cursory glance at Fig 1.12(a), a daily chart of the GBP/USD exchange rate, will confirm what most of us already know, the GBP is continuing its steady decline against the American dollar. Since the middle of August 2011 it has lost about 7% of its value against the US currency.
The Ichimoku Kinko Hyo chart confirms our suspicions. After the GBP/USD exchange rate dropped below the cloud on 5th September last year, we have only seen it above the cloud once, between 25th October and 14th November, when the bulls managed to push it above the Ichimoku cloud for a few days, 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 grips of a bear run against the GBP, which is unlikely to change soon.
So far, the price has failed to break through the low of 1.52708 we saw on 6th October last year. When this happens it should be a good entry point for a medium term short trade.
Anyone going long on the GBP 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.