Forex Trading: GBP/USD Looks Like A Giant Coil Spring - Is It Ready To Pop?

The GBP/USD looks like a giant coil spring, or a wedge formation on the 1 Hour chart, as we start to see signs of the three’s a crowd rule. This rule states that when the price and both the 100 and 200 MA’s converge, there is bound to be a move in one direction or another. As traders we now do our analysis and get prepared in either direction as the market loads up pressure on the GBP/USD to move.

In the 5 Min chart, we can see the pair testing trend line resisntance in the past hour. The market as a whole, is likely trying to gage the tops and bottoms of this large wedge. The pair has room on the top side, to the next major level of resistance at 1.5177 which is the 38.2% move from high on Feb 17, 2010 to the low on March 1st, 2010. Above this the pair will hit the 50% retracement level at 1.5299. If the pair breaks lower, support will be encountered at 1.4888 and below that at the 2010 low of 1.4784.

Subscribe by RSS Subscribe by Email