Here’s a view of the GBP/USD with an engulfing candle that may prove a temporary top for the next day or so.

Divergence in trading means exactly that. When something is moving in opposition and diverging rather than running in tandem or moving towards.  So, many indicators can be used when looking for divergence.

I keep it simple with a 10-period RSI. When the price action makes a new high or low and the indicator does not, then this is divergence.

This usually signals a high probability that a reversal is coming soon. However please remember that like all other technical analysis methods, it not 100% accurate.

The USD/CAD still looks corrective in the move up but a critical trend-line is acting as support.

I have been saying for a few days now that a bottom could form on this pair.

The key line is still the descending lower trend-line. Although we broke below, the candle did not close below it. In Elliott Wave terms, I can still count this as a ‘Double zigzag” correction from the top.

So until we head much lower I look at this pair with a slight bullish bias. At least some sort of correction is due.

The EUR/USD move down is not accelerating just yet and the long-term trend-line is not yet breached. And the move down is still maintaining a corrective look. Whether a top has formed or not, a correction back up is coming due.

The risk is now equal in both directions.

the index price is being ressisted by a long term trend-line. The break or rejection here could prove very important to the long-term trend.

Last week market the first time volaitlity turned the conner and stopped decending and and daily moves were greater than the last 100 day average.

Volatility tipicaly increases at pivot points and break-outs. At this point because we have struck and reversed of the decending trend-line I would expect the probability of another thrust lower in the coming days.

Please visit:

http://www.fxstreet.com/technical/analysis-reports/fx-weekly-report/2009-09-28.html

The average daily move on the EUR/USD over the last 100 days is 168 pips (Note that this changes depending on where the day starts/stops). It has now moved more than that today.

This means a return to volatility and when this happens at an apparent turning point it usually signals a change in trend or break-out!

Will this be a turn? or a Break-Out.

Changing view of the GBP.