When a market is trending in a given direction, the currency will quite often put in consecutive daily higher lows as a reflection of the overall strength of the trend. As such, we are always on the look out for any broken sequences of higher lows to suggest a potential shift in the overriding structure.
Gbp/Usd: In the above example, daily studies in Cable are starting to look overbought following the recent moves, and after putting in 4 consecutive daily higher lows, the pair has finally broken the sequence on Wednesday to take out Tuesday’s low. This could now open the door for a resumption of the broader downtrend and we will be looking for confirmation on a break back below Wednesday’s key 1.4515 low.
Written by Joel Kruger, Technical Currency Analyst for DailyFX.com
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