The unexpected drop in September durable goods orders and weak details, play on fears the US economy is losing momentum. The dollar was pushed lower. This enabled sterling to test the neck line of a head and shoulders bottom pattern that we had pointed out. It is depicted below in the Great Graphic from Bloomberg.
The left shoulder was carved on October 3-4 around $1.5950. The head was by the spike to $1.5875 on October 14-15. The right shoulder may have been set by last week's test on $1.60. The neckline comes in today near $1.6160. The measuring objective would project toward $1.6460. The would put it between the 38.2% and 50% retracement targets of the down move from the mid-July high just shy of $1.7200 ($1.6375 and $1.6530 respectively). The latter near the mid-September spike.
We have noted some other constructive technical indicators. The recent lows in sterling have not been confirmed by the RSI or MACDs. This has created bullish divergences. The five-day average is poised to cross above the 20-day average today.
Great Graphic: Sterling Testing Neck Line of Head and Shoulders Bottom
Reviewed by Marc Chandler
on
October 28, 2014
Rating:
Reviewed by Marc Chandler
on
October 28, 2014
Rating:
