British pound likely to drift lower

Canadian dollar
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The British pound has broken below the bottom of the descending triangle that I have been paying attention to for some time. That being the case, the market has clear the 61.8% Fibonacci retracement level, which on the whole tends to allow the market to go looking towards the 100% Fibonacci retracement level. Add in the fact that we have a descending triangle, then it suggests that perhaps we are going to go lower.

That being said, I don’t necessarily think it is a major break down, I think it is more or less a sign that we are going to drift lower as we have the Brexit delay intact, so at this point we go back to the idea of trading on headlines coming out of the UK parliament. That being said, I believe that the market is exhausted with that scenario, and I think that we are going to see a general drift lower, simply from a lack of interest.

Looking at this chart, I would also point out that the potential move based upon the size of the triangle suggests that we are going to go down to the previous downtrend line to test it for support again. I think that can happen over the next several weeks, as it is not only several months before the Brexit has to be resolved, there’s no sign of a resolution anytime soon. That being said, the 100% Fibonacci retracement level is near the 1.28 handle, and that’s an area that I think some traders will be more than willing to take their profits. You can do that, or perhaps take half of your position often move your stop losses to breakeven. It really comes down to your comfort.

The alternate scenario is of course based upon the one hour chart, and the recent high of the 1.3020 level. If we break above there and then clear the descending triangle downtrend line, we would have to reevaluate the entire situation and see if we are heading back in the consolidation. At this point though, I think that it’s very unlikely.

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