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GBP/USD Approaching Key Intraday Resistance

Last updated 1/30/2009 11:46 AM EST (GMT -5) 0 Comments - Add your comment

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FX360 Technical Analyst Staff

Technical Analyst, GFT

A bearish butterfly pattern is nearly complete at converging Fibonacci resistance near 1.4550-.4525 providing a high probability sell opportunity.

On the 2hr chart, our projected entry is based on the completion of and AB=CD pattern at 1.4521 which is just below the 161.8% extension of BC, and the 161.8% of XA. Additional confirmation comes from the 70.7% retracement of YZ at 1.4546 (see 4hr chart below) .

Current risk sits at 1.4631 just above a 127.2% ABCD extension. Intitial profit target (T1) is set just above the 38.2% retracement of CD ( 1.4416) at which point stops will be moved to break even. Secondary target (T2) set just above 61.8% of CD (1.4328).

A move below point C (1.4186) prior to reaching the projected entry will negate this bearish butterfly pattern and invalidate the trade. As always, keep an eye out for gaps as prices approach point D as this may suggest a strong continuation is in progress increasing the chance of pattern failure.

This setup represents an intraday opportunity, and it would be a good idea to exit the position before the market closes for the weekend to protect yourself against gap risk.

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