The British Pound crosses are under attack. The GBPCHF has broken a short term support line and may be headed for a test of 1.9260. The GBPCAD is testing the 2007 low at 1.90.
There is no reason to change our call for a lower GBPCHF. We wrote last week that “the GBPCHF could break through 2.0963 in order to complete a larger correction that began at 1.9421. However, the advance to 2.0963 was in 3 waves so it is very much possible that the corrective advance is complete and that the next move is lower in a 5th wave…to below 1.9421.” The break below a short term support line yesterday confirms the bearish structure. Risk should kept to 2.0807 for bears.
We wrote last week that “another leg down in the triangle could test 1.93 or so before a bounce. Bigger picture, triangles are continuation patterns, so a continuation of the longer term downtrend is likely eventually.” The GBPCAD sliced through triangle support this week and is headed for a break of the November 2007 low of 1.9011. Daily RSI has entered oversold territory, but that should be viewed as a bearish signal. Moves extend as oscillators enter into ‘extreme’ territory. Only after divergence is evident should one begin to look for a turn. Near term, a rally to 1.95 resistance would present a bearish opportunity against 1.99 for the break below 1.90 and resumption of long term weakness.
The GBPAUD decline from 2.2046 is probably a 4th wave within the 5 wave bull cycle from 2.0295. This 4th wave could unfold as a triangle, which makes the pair a good range trading candidate over the next several weeks between roughly 2.13 and 2.18/20. Coming under 2.1244 exposes the 61.8% at 2.1025.
Jamie Saettele writes Forex Technicals: The Day Ahead, Monday-Thursday (published at 6 pm EST), Daily Technicals every weekday morning (9 am EST), COT analysis (published Monday mornings), and analysis of currency crosses throughout the week. He is also the author of Sentiment in the Forex Market.
Contact at jsaettele@dailyfx.com
We wrote last week that “divergence among price and RSI suggest a sharp pullback is likely near term. Resistance is former support just above 2.65.” The GBPNZD bottomed on Friday and rallied sharply to 2.67 by Tuesday morning before retracing nearly the entire bull move. Expect a range between 2.60 and 2.67 for the next week. Coming under 2.60 exposes a support line near 2.5550.
