Anatomy of a reversal
The British Pound fell miserably since july 2014 and showed the first signs of awakening at the beginning of 2015. It was a flash in the pan and the pound continued to fall until mid march, when the support at 1.47 level has proven to hold, at least until today. Right now the price is undergoing a strong volatility compression, signaled by the fact that the Bollinger bands came within the Keltner's: as we know, reduced volatility is usually followed by sharp price movements, often with an explosive character. This seems to be the fate of the pound, the problem is figuring out which direction this movement will occur. In this regard, the Volume Spread Analysis suggests a bullish movement: the bar on March 18 looks definitely like a 'stopping volume' and the recent drop in prices took place with decreasing volume, as usually happens with 'controlled' pullbacks. In addition, both the seasonal trend and the Commercials behavior look bullish.
Of course, as always, there is also a contraindication. On May 7 in the UK there will be elections, and this time they look very critical, given the rise of some smaller political formations that can make it difficult to form a government. And, usually, the pre-election period is characterized by great instability of the currency. So, VSA would encourage us to buy, the proximity of the election would advise us to be cautious. So, it's the same old question... to risk or not to risk?