BarroMetrics Views: US$ - Bear Market Rally or Start of New Up Trend?
Normally I’d look at the DX (US$ Index) to answer the question. But for that instrument, I have insufficient data. What I’ll do instead is first look at the majors, then the AUDUSD and USDCAD.
Today, I’ll start with the GBPUSD.
Figure 1 shows the 12-Month Swing (yearly trend). The 12-M shows one of the classical formations of a sideways market:
- Rejection at the top
- Rejection at the bottom
- Formation of the Value Area around 50% of the range.
Since the last rejection was off the low, I expected the GBP to complete an ‘ABCD’ sequence (thus forming the Value Area) and then break above C to head for the Primary Sell Zone. The scenario seemed to be on track when it rallied off D. However, the GBPUSD has now stalled at previous resistance (arrows).
So, for me at this stage, the 12-month is providing equivocal information. But one point is clear: should the GBPUSD have a bearish-conviction close below D, we can expect a test of the rejection low at 1.0345
Next week, I’ll look at the 13-week and 18-day to see if they can shed some light on the longer-term prospects for the US$.
FIGURE 1 GBPUSD 12-Month Swing
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