Looking at the above charts, we see that although GBP/USD moved a bit higher earlier today, the orange resistance zone (created by the very long-term red declining resistance line based on the July 2014 and June 2016 peaks (marked on the weekly chart), the red increasing resistance line based on the previous highs (seen on the daily chart) and the area between the 161.8% and 173.2% Fibonacci extensions) stopped currency bulls, triggering a sharp pullback. Thanks to this drop GBP/USD approached the last week’s lows, which together with the sell signals generated by the daily indicators suggest lower values of the exchange rate in the coming week.
How low could the pair go? In our opinion, if the exchange rate moves lower from current levels, we’ll see a drop to around 1.3266-1.3291, where the 38.2% Fibonacci retracement based on the August-September upward move and the August high are.
Looking at the above charts, we see that the previously-broken long-term blue support line (which currently serves as the nearest resistance) based on the September 2012, September 2013 and June 2014 lows (seen more clearly on the monthly chart) stopped currency bulls in the previous week. Earlier today, their opponents pushed the pair a bit lower, but will we see further deterioration in the coming week? Let’s take a closer look at the daily chart and find out.
From the very short-term perspective, we see that USD/CAD is consolidating under the orange declining resistance line and the July lows, which suggests that the recent upward move could be a verification of the earlier breakdown below them and the above-mentioned long-term blue support/resistance line.
Additionally, the CCI and the Stochastic Oscillator generated the sell signals, increasing the probability of reversal and lower values of USD/CAD in the coming week. If this is the case and the pair moves lower, the initial downside target will be the lower border of the blue consolidation (around 1.2196). If this support is broken, a test of the recent lows can’t be ruled out.