The British Pound had a big selloff today. On the fundamental side, the selloff has been attributed to concerns over the UK banking system. A look at the charts gave us reason to look for a short sale today.
Below is the daily chart for the December British Pound futures. The previous two days are circled. Wednesday had a narrow range and a doji, so I was looking for a breakout move yesterday.
Yesterday turned out to be an indecisive day, however. There wasn’t really much extension of Wednesday’s range, and it couldn’t really take out yesterday’s low.
Trendline break
In spite of yesterday’s indecision, it still gave us clues to possible action today. It closed below the trendline off the recent lows, and was just above Fibonacci retracement support at 16427. The fact that this area was support, and was able to hold up prices for two days, meant that a breakout of that level could lead to a selloff.
Below is a 30 minute chart for today. The red horizontal line is at 16424-yesterday’s low. Note how the break of yesterday’s low led to today’s big selloff.
The red line was yesterday’s low
In the daily chart I included a couple of the indicators I use (momentum and MACD), but this trade setup wouldn’t have required any indicators to be recognized. The KISS principle certainly applies to chart analysis!
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