Following last Friday’s sell-off, price anchored itself below 1.60 support/resistance, continuing the bear trend from 1.615 which started 1 week ago. Ahead of us we have 1.583 (previous swing low on 16th Nov) acting as interim support against further downside. Stochastic reading is now entering Oversold region, very close to the previous lows also on 16th Nov which was the beginning of the price recovery back towards 1.64. Looking purely at this, it is hard to see GBP/USD breaking below current support. We also have Weekly Pivots (not shown on chart) S1 and S2 at 1.576 and 1.566 respectively, making further efforts downwards harder.
From the Hourly chart, we can see that price has broken off from the Channel which is formed last week. Today’s early trade is threatening to break back into the channel, with Stochastic readings suggesting that price could be rebounding. Current price level becomes critical in setting the tone for the week. Should price fail to break into the Channel, this will reinforce the bearish tone and add strength into bears to break the eventual 1.5830 support, potentially triggering a longer-term bearish breakout. A move back into the Channel opens up Channel Top as an interim resistance, with 1.59 round number the the 1st level bulls have to contend with before thinking about high levels beyond 1.595. However, a bullish rally that push price above Channel Top will help open up 1.63 as a longer-term target via the Daily Chart.
With EUR/GBP trading at 9 months high, it’ll also be interesting to see how the dynamics of Cable will affect EUR/GBP’s bullish follow-through.
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