The move back toward 1.6250 mentioned in yesterday's post is complete. Now the challenge begins. I would love to see a close above that point for more confidence in a long position. GBPUSD has failed to take over the 1.5129 point failure from this past Wednesday and Thursday. GBPJPY rallied from 134.50 to 137.00 on the NFP release this morning but has failed to take over the Magnet line at 137.43 so far, and has fallen back to 136.50/60 area in late morning trade. A new black candle has been created on that move.

All this doesn't inspire much confidence in the temporary, fractured strength of the GBP going forward. In the last 156 weeks (3 years to date) the GBPCHF has not crossed the Magnet line only 31 times. That's a spectacular 80% accurate target line. In addition to that, only 6 times were any of those weeks back to back, last week and this week just happens to be one of those double up times. Only one of those six first Magnet Lines has never been touched again, that being the double week ending 11/27/07. These statistical ranges bear out when you extend the study to ten years as well on other pairs.

This tells me several important things. First that if price closes in the 1.6240/50 area, we can expect 1.6197, next week’s projected magnet to print. I will trade that first. We can also expect that 1.6732 will come back into focus in the future. By "the future", I mean that of the five past double week misses it took 20, 3, 4, 2 and 2 weeks to find the first missed Magnet Line. The case for some GBPCHF strength is building. However it is also clear that these double week misses were near tops and bottoms of trends, lending to the belief that the print of 1.6000 lows this week may have just been the beginning of a new down ward push for the pair. Needless to say next week is going to be a very interesting trading week for this pair.

To summarize, I'll be looking for a trade to the 1.6197 area then for long positions to begin testing the 1.6473 zone first then 1.6732 mark. During those trades, significant weakness may send me short in support of continued downward trend moves, though I prefer the move upward first.

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