Let’s end the week with a daily view of the most heavily traded currency pair in the world. The EURUSD has bounced from the trendline that is drawn off of April and September lows (another potential channel line is the lower line, in blue). I do expect a break and sharp decline, as per the wave count, sentiment readings, and recent divergent/overbought momentum readings. I indicated yesterday that “my focus is on resistance in the No change from yesterday – “The decline from 1.7050 could be a series of 1st and 2nd waves, part of a leading diagonal, or a 3 wave correction. Price action since 1.6750 could also be in the mold of a triangle. There are many possible counts right now but most point lower with 1.6700 intact. Be particularly cautious here though as the GBPUSD rally has accelerated (albeit through a very short term resistance line) and 1.6700 is in imminent danger.”
GBPUSD continues moving sideways above 1.6251. The price action from 1.6251 is more likely consolidation of downtrend. Another fall towards 1.6000 is still possible after consolidation, and a breakdown below 1.6251 level will signal resumption of downtrend.
Former supports are now resistance at 1.6484 and 1.6530. Strategy is to short on rallies to these levels. The decline from 1.7050 could be a series of 1st and 2nd waves, part of a leading diagonal, or a 3 wave correction. Price action since 1.6750 could also be in the mold of a triangle. There are many possible counts right now but most point lower with 1.6700 intact.
After a sharp drop from 1.6692, GBPUSD trades in a range between 1.6251 and 1.6450. Price action from 1.6251 is more likely consolidation of downtrend. Another fall is expected after consolidation and a break below 1.6251 will signal deeper decline towards 1.6000 zone.
Former supports are now resistance at 1.6484 and 1.6530. Strategy is to short on rallies to these levels. The decline from 1.7050 could be a series of 1st and 2nd waves, part of a leading diagonal, or a 3 wave correction. Price action since 1.6750 could also be in the mold of a triangle. There are many possible counts right now but most point lower with 1.6700 intact.
After a sharp drop from 1.6692, GBPUSD trades in a narrow range above 1.6251, suggesting a minor consolidation is underway. Range trading between 1.6251 and 1.6450 would more likely be seen later today. However, deeper decline is still possible after consolidation and a break below 1.6251 level will signal another fall towards 1.6000 zone.
Former supports are now resistance at 1.6391, 1.6484, and 1.6530. Strategy is to short on rallies to these levels. The decline from 1.7050 could be a series of 1st and 2nd waves, part of a leading diagonal, or a 3 wave correction. Price action since 1.6750 could also be in the mold of a triangle. There are many possible counts right now but most point lower with 1.6700 intact.
Being contained by 1.6741 critical resistance, GBPUSD pulled back sharply from 1.6692 last week and reaches 1.6251 so far, suggesting that the uptrend from 1.5708 has completed. Now the fall from 1.6692 is more likely resumption of longer term downtrend from 1.7042 (Aug 5 high), deeper decline is still possible in a couple of days and next target would be at 1.6000 zone.
GBPUSD broke above the falling trend line from 1.7042 to 1.6741 and is under pressure by 1.6741 resistance. Now the pair might be forming a cycle top at 1.6692 level on daily chart. Pullback to retest 1.5708 support would more likely be seen in next several days. However, a break above 1.6741 key resistance will indicate that the downward trend from 1.7042 has completed at 1.5708 level, then further rebound towards 1.0742 previous high could be seen to follow.
For long term analysis, GBPUSD has formed a cycle top at 1.7042 level on weekly chart. Further fall to 1.5000 area to reach next cycle bottom is expected in next several weeks.
Yesterday, I wrote that “a rally above 1.6643 would complete 5 up from 1.6239 and shift risk lower towards 1.6500 (at least). 1.6715/50 is a resistance zone that I will sell into.” I later updated those levels to 1.6670-1.6750 at DailyFX Forex Stream. After trading to a high just below 1.6700 (the high was made close to the 61.8% extension of the 1.5707-1.6404 advance), Cable has plunged over 300 pips. Former supports are now resistance at 1.6484, 1.6530, and 1.6607. Next week’s strategy will probably focus on shorting on rallies. Short term support is 1.6300/20. There are a number of patterns that could be underway from 1.6750, which will be discussed in FX Technical Weekly (published later today).
After a small correction, GBPUSD’s uptrend extends further to as high as 1.6434 level. Another rise towards 1.6600 area is expected in a couple of days. Support level is now located at 1.6240, as long as this level holds, uptrend will continue.
The GBPUSD has returned to and exceeded the head and shoulders neckline that was broken in September. Resistance extends to a line extended from the August and September highs, which is at 1.6456 today (the line decreases 11 pips per day). The 61.8% of the decline from 1.6746 has held on a daily closing basis. Structurally, the decline from 1.7000 may be a series of 1st and 2nd waves.
GBPUSD broke above 1.6125 key resistance and reached as high as 1.6399 level, suggesting that a cycle bottom has been formed at 1.5708 level on daily chart. Further rise to test the resistance of the falling trend line from 1.7042 to 1.6741 is expected next week, a clear break above the trend line resistance will take price to test 1.6741 resistance. However, as long as 1.6741 resistance holds, the rebound is treated as correction of downward trend from 1.7042 and another fall below 1.5708 is still possible after correction.
For long term analysis, GBPUSD has formed a cycle top at 1.7042 level on weekly chart. Further fall to 1.5000 area to reach next cycle bottom is expected in next several weeks.
The GBPUSD has returned to and exceeded the head and shoulders neckline that was broken in September. Resistance extends to a line extended from the August and September highs, which is at 1.6467 today and 1.6456 Monday. I wrote yesterday that “longer term traders should look to position short against 1.6746 in the coming days.” This remains the strategy so be sure to follow DailyFX Forex Stream for position updates.
The GBPUSD has returned to test the head and shoulders neckline that was broken in September. Resistance extends to a resistance line extended from the August and September highs, which is at 1.6478 today and decreases 22 pips per day. Longer term traders should look to position short against 1.6746 in the coming days. 1.6350 is potential resistance as well (61.8% of 1.6746-1.5707).
I wrote yesterday that “an objective remains 1.5300 (just above the 161.8% extension) but a corrective rally may delay a decline to that level. In any case, a bearish bias is warranted against the line extended from the September and October 8th highs.” The line has held thus far. An extension of weakness in a larger 3rd wave remains possible with price below 1.6125. Strategically, keep a small position on in the event of this occurrence. Potential short term supports are 1.5880, 1.5840, and 1.5825.
GBPUSD rebounded sharply from 1.5708, suggesting that a short term cycle bottom is being formed on 4-hour chart. Key resistance is located at the falling trend line from 1.6741 to 1.6120, a clear break above the trend line resistance will confirm the cycle bottom, then further rise could be seen to test 1.6125 resistance. Key support is now located at 1.5708, only fall below this level will indicate that the downtrend from 1.6741 has resumed, then the next target could be at 1.5500-1.5550 area.
I wrote yesterday that “the decline may have completed 5 waves down from 1.6746. An objective remains 1.5300 (just above the 161.8% extension) but a corrective rally may delay a decline to that level. In any case, a bearish bias is warranted against the line extended from the September and October 8th highs.” 5 waves are visible from 1.6746 so the odds of a correction back to at least 1.6125 are increased. An extension of weakness in a larger 3rd wave remains possible with price below 1.6125. Strategically, keep a small position on in the event of this occurrence.
As expected, GBPUSD broke below 1.5770 previous low, suggesting that the downtrend from 1.6741 has resumed. Deeper decline is expected to 1.5500-1.5550 area in a couple of days. Initial resistance is at 1.5890, followed by the falling trend line on 4-hour chart extended from 1.6741 to 1.6120, as long as the trend line resistance holds, we would expect downtrend to continue.
The GBPUSD has traded below its September low but the decline may have completed 5 waves down from 1.6746. An objective remains 1.5300 (just above the 161.8% extension) but a corrective rally may delay a decline to that level. In any case, a bearish bias is warranted against the line extended from the September and October 8th highs. This line is at 1.6060 today and decreases 41 pips per day. 1.5930 is potential short term resistance.
The line extended from the September 11, 15, and 23 highs defines the short term trend. This line is at 1.6105 today (just pips from the high). Continue to favor the downside against there as price action since the 9/28 low is viewed as a consolidation that will give way to additional weakness.
