British Pound Clears Its 200-day MA for an Initial Sign of a New Bull Market

• Pound is in a Long-Term Secular Bear Market
• Crossing of the 200-Day Starts the Ball Rolling for a Primary Bull Market
• Pound Set to Break Against the Euro

Pound is in a Long-Term Secular Bear Market

Chart 1 shows that the British Pound has been in a secular bear market since 2008, having experienced a series of declining primary trend peaks and troughs. Recently, the currency was at a secular low and is currently challenging its 12-month MA. It's already above this average, but we must remember that this is a monthly chart and the only plots that count are those that develop at month-end. In my view, an end to the secular bear would be signaled with a break above the two converging trend lines, as this would confirm that the currency had successfully completed a huge double bottom formation. Those lines are currently intersecting at around $1.45. Encouragement comes from the fact that the Coppock Curve has started to rise and tentatively move above its MA. I'd certainly like to see a more decisive signal before concluding beyond a reasonable doubt that it has turned for real. That's because we have seen some false wobbly action in the past that would have ended in tears for the bulls. The point here is that, if the currency can build on recent strength, it is in a position to trigger some really important longer-term bullish signals.

Chart 1

Crossing of the 200-Day Starts the Ball Rolling for a Primary Bull Market

What has happened recently is that some potentially positive news for an ending of the Brexit uncertainty has led to some positive vibes for the currency, which has now cleared its 200-day MA. That's not enough, in and of itself, to signal a primary bull market, but other bullish and potentially positive indicators are either turning or are close to doing so. Chart 2, for instance, shows the MA crossover, as well as a decisive break of the 2018-19 green downtrend line. Whenever a reasonably reliable MA is crossed at approximately the same time as a nice trend line violation, it gets my attention. That's because both series represent a dynamic zone of support or resistance. If a price can punch through both, it's a much more serious technical event. Since the line is well over a year in length, its violation offers a potential primary trend reversal signal.

The situation would certainly be enhanced if the Special K crossed above its signal line and the 2018-19 bear trend line in a similar manner to its behavior in the spring of 2017 and early summer of 2018.

Chart 2

That seems a likely possibility, as Chart 3 shows that the Pound has completed a 4-month inverse head-and-shoulders pattern, offering a potential upside objective of $1.33. Note that a worthwhile attempt at closing the recent gap has already been made, leaving the currency in a position where it is free to move higher. Note that the daily KST has also gone bullish.

Chart 3

Finally, Chart 4 shows that the Pound is right at the 2014-19 downtrend line. It's already slightly above the 65-week EMA, but this is a Friday close chart, so we need to wait until the end of the week to see if the line and EMA are violated. Once again, since they are in the same vicinity, their joint violation would represent a very important technical event should these violations materialize.

If momentum has any say in this, the recently-generated intermediate KST buy signal and the rising short-term KST both argue for an upside breakout.

Chart 4

Pound Set to Break Against the Euro

Finally, Charts 5 and 6 show that the Pound is poised to break out against the Euro. Its long-term KST (Chart 5) is already positive and should support a move above the horizontal green trend line.

Chart 5

That same potential base is also featured in Chart 6, but this time we are using weekly data. Both the short- and intermediate-term KSTs are pointing north, which strongly suggests that the Pound/Euro cross is about to move strongly in favor of the Pound.

Chart 6

Good luck and good charting,

Martin J. Pring

The views expressed in this article are those of the author and do not necessarily reflect the position or opinion of Pring Turner Capital Groupof Walnut Creek or its affiliates.