Before the end of the year, after Christmas, we stated that Cable is ready for another leg down. Now, after that downswing happened and gave around 200 pips, we change our view into more optimistic. Recent bearish movement allowed the price to beat the lows from 11th and 25th of October (green area). After making those new lows, price created a reversal formation – triple bottom.
Triple bottom is supported by the divergence on MACD and RSI, it is also active as the price managed to break the neckline of this formation (blue line). After the breakout, the price is still advancing north and making higher highs and higher lows. This shows that traders are committed and this reversal is legitimate.
The closest resistance for now is 1.24 (orange area), the next one is labelled in pink and located around 1.255. Upswing looks promising but we have to keep in mind that it is still a counter trend trade, which always makes it more risky. On the other hand, with higher risk we should expect a better pay-off so the potential profit here (if the trend actually reverse) can be significant. Bullish scenario on the cable will be denied once the price will come back below the neck line (blue) but so far, chances for that are limited.
