Yesterday’s gapped up spinning top candle offers us a salutary lesson of trying to trade in thin markets where many were closed for the Easter break, with the bearish tone now firmly in place and prices pushing into the strong support in the .8725 to .90 region, which will provide the key to any longer term move in the $uros to poundrong> pair.  If this region is broken, then once prices break below 0.87 we could see a move significantly lower, however if the support holds intact then this could provide a bounce back up within the consolidation region we have seen in the past few weeks.  With all three moving averages pointing lower my bias is towards the bear side with a move longer term back to retest the support at 0.78, but it is unlikely that we will see this much before the summer.

On the weekly chart we have three consecutive down bars, the last of which closed below both the 9 and 14 week moving average.  However, from a technical perspective it could be argued that the current price action is forming a pennant pattern, which will only fail to evolve if and when we see a break below 0.8725. My trading suggestion is to look for short positions by using the shorter time frames and always looking to enter any trade on shooting stars or bearish engulfing candles.   Given the nature of this pair tight stops are the order of the day.

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