Cable to go on a losing streak

The Cable lost ground after the OECD recommended reductions in the budget deficit so that the central bank could keep interest rates low, which would make the Sterling less attractive, vis a vis the high yield currencies. It has already broken the Nov 12 level of 1.6570 in today’s session indicating bears are on the prowl. The pair has touched the level of 1.6605 twice, facing stiff resistance and failing to break through.

The pair has a downward bias and is continuously falling in spite of the improvement in UK retail sales. The pair has also broken the short term support trend line and is sloping downward. The bear run may take the pair further down to test the level of 1.6300 in the weeks to come, if the 1.6515 level does not hold.

Technicals confirm the downward view as the RSI is falling, currently at 27.733, just below the oversold zone. The OBV is looking southward, clearly suggesting bearish sentiment, as the MFI follows suit, going below the oversold zone, now at 16.7462, suggesting the gradual withdrawal of money from the pair. The pair has fallen below its 21 day EMA of 1.6580, also breaking the short term 14 day EMA, suggesting the bears are gaining strength.

Downtrend appears strong as the pair is currently trading below the lower Bollinger band. The short term trading strategy would be to go short with a target of 1.6580, holding a tight stop loss of 1.6615 as Bulls are likely to enter at that point.