GBP/USD Analysis Report
Munther Marji | Sep 08, 2014 08:15AM ET
The Pound started the week with a 150-pip gap to the downside to open at a 10-month low of 1.6181, before recording another 10-month low at 1.6102! The reason behind this gap as reported, is fresh Scottish polls supporting leaving the UK. If this actually happens, it will only be logical for the Pound to lose more & more value, and add to the 6.4% loss in value seen since July!
Technically, breaking below Friday’s low 1.6281 was an obvious sign of weakness because this level was one pip below the long Term Fibonacci 38.2% retracement. The next big level is the 50% retracements, which is at 1.6001. If we draw a trend line using February’s top & July’s 6-year high, then draw a parallel line to it, and place it at Jul’s 2013 major bottom 1.4812, this line would run just a little below 1.6001, adding to its importance. This is probably the most important short term support for the time being. There is no reason preventing the price from falling below today’s current daily low 1.6102, but the bears need to break below 1.6001 in order to continue moving south.
If this break actually happens, the medium term outlook will be seriously hit. Targets for such a break include 1.5832 as the minimum target, followed by 2 more important levels at 1.5720 & 1.5492! Closer & shorter term support levels can be found in the support section below.
On the resistance side of the story, the sharpness of this drop is problematic because it makes the trend lines very steep, and therefore not very helpful. So we first turn to the micro term retracements, and we found 2 levels at 1.6167 & 1.6194 which look like they deserve our attention. A break above the first is a first sign of weakness, but it will be a minor one until we break above 1.6194. If this level gives way then, a recovery to “close the window” could follow. The Japanese call the gap a “window”, and they refer to the moves that cover the gaps as move that close this window. A break above 1.6194 could be the first real step towards this happening.
Above 1.6194, we will be targeting 1.6308 at least, followed by 1.6372 which sure looks more attractive since it is above Friday’s close, which is the beginning point of the gap.
Attached Chart(s):
Support:
• 1.6102: today’s current daily low at the time of preparing this report.
• 1.6058: November 18th 2013 daily low.
• 1.6001: long term Fibonacci 50% calculated for whole enormous move from 2013 yearly low 1.4812 to July’s 6-year high 1.7190.
• 1.5954: September 23rd 2013 daily low & short term bottom.
• 1.5902/21: a well-known support area which includes several daily lows from October & November 2013.
• 1.5832: long term Marji 57.1% calculated for whole enormous move from 2013 yearly low 1.4812 to July’s 6-year high 1.7190.
• 1.5720: long term Fibonacci 50% calculated for whole enormous move from 2013 yearly low 1.4812 to July’s 6-year high 1.7190.
• 1.5492: long term Marji 71.4% calculated for whole enormous move from 2013 yearly low 1.4812 to July’s 6-year high 1.7190.
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Resistance:
• 1.6167: micro term Fibonacci 50% calculated from the Asian session’s high 1.6231 to the current daily low 1.6102.
• 1.6194: micro term Marji 71.4% calculated from the Asian session’s high 1.6231 to the current daily low 1.6102. This is the first important level for the short term.
• 1.6231: Asian session’s high.
• 1.6281: Friday’s low.
• 1.6308: short term Fibonacci 38.2% retracement level, calculated for the drop from September 1st daily high 1.6642 to today’s current daily low, and 10-month low, 1.6102.
• 1.6327: Friday’s close, the beginning point of the gap.
• 1.6372: short term Fibonacci 50% retracement level, calculated for the drop from September 1st daily high 1.6642 to today’s current daily low, and 10-month low, 1.6102.
• 1.6410: short term Marji 57.1% retracement level, calculated for the drop from September 1st daily high 1.6642 to today’s current daily low, and 10-month low, 1.6102.
• 1.6436: short term Fibonacci 61.8% retracement level, calculated for the drop from September 1st daily high 1.6642 to today’s current daily low, and 10-month low, 1.6102.
• 1.6488: short term Marji 71.4% retracement level, calculated for the drop from September 1st daily high 1.6642 to today’s current daily low, and 10-month low, 1.6102.
Trend:
• Short term: Down, as long as we are below 1.6194.
• Medium term: Down, as long as we are below 1.6488.
• Long term: Up, as long as we are above 1.5492.
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