FxWirePro: Cable rejects resistance at 7DMA, leading oscillators signal more downside potential

After the formation of "shooting star" at 1.4498 whose highs were rejected at 1.4570 where it has tested resistance several times in the recent past as well. For now, the pair as shown some more weakness to slip below 7DMA and today's highs were rejected at 7DMA (1.4456 levels).

In between, the pair has also made an intermediary channel with a range of 1.4570 and 1.4350 (220 pips) within which it has acted as resistance and support several times in the recent past (see oval shaped circled areas).

Both oscillators (RSI and stochastic) converging downwards right from the overbought territory and initiating any fresh longs are not at all advisable for both intraday traders and on delivery basis (see intraday charts).

Stochastic: Although the stochastic curves approaching oversold region but no traces oversold situation as the slow stochastic curve noises with %D line cross over around 20 levels (current %D line flashes at 14.1889) which means that it alarms bears trying to take over the rallies.

RSI: Current daily RSI (14) converging downwards 50.6900 levels is a signal for bearish momentum.

Considerably, downtrend seems to be intact as it has remained well below 21DMA and 21DMA crossing over 7DMA is also a bearish signal.

Hence, we would foresee GBP on weaker side ahead of today's CPI outcome even though it is likely to show a slight jump at 0.3%. So, with spot FX at 1.4422 the smart trade idea would be use the rallies for better entry points to short for targets upto 1.4343 and upon breach of this level 1.4230 is also quite feasible keeping the stop loss at 1.4498 as we mentioned above (the resistance).