By Mohammed Isah of fxtechstrategy.com
: The pound/dollar currency pair may be heading toward a corrective recovery, even though it closed lower this week.
The pair's inability to hold on to its Friday losses and the subsequent bounce higher at the end of the session (forming a hammer candle pattern, which is a bottom reversal signal) suggests a temporary loss of momentum.
To view a chart of the pair,
There are now two possible scenarios.
In the first, the pair will follow through higher on the mentioned hammer, triggering a fresh corrective recovery with the key upside target standing at 1.5532, the Feb. 8 low. This level should reverse roles and provide resistance, turning the pair back down again, but if it snaps, we could see further recovery toward 1.5610 level, the Feb. 15 low, and then 1.5814, the Feb. 17 high, where we should see a cap.
In the second scenario, the pair will return back to that hammer low at 1.5343. An eventual break there would activate the continuation of the medium-term downtrend toward the 1.5276 level, its .50 Fibonacci Retracement (1.3501-1.7041 rally) ahead of its big psychological level at 1.5000.
On the whole, having decisively violated the 1.5532 level to resume its broader medium-term downtrend, there's risk further lower prices, although the immediate risk is a recovery higher on the back of a hammer formation.
Mohammed Isah is a technical strategist and head of research at FXTechstrategy.com, a technical-research Web site. He has been trading and analyzing the foreign exchange market for the past seven years. He formerly traded stocks before crossing over to the forex market, where he worked for FXInstructor LLC as a technical analyst and head of research before joining FXTechstrategy.com. He has written extensively on the forex market and technical analysis and his articles have been featured in The Technical Analyst Magazine, The Forex Journal Magazine, The International Business Times and FXstreet.com. At FXTechstrategy.com, he writes daily, weekly and long-term technical commentaries on currencies and commodities, which are offered to its clients. He also produces
for his subscribers. He provides full coverage of the forex market with specific focus on G10 currencies as well as the commodities markets, with focus on five key commodities.