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Trading Lessons

GBP/USD Extends Losses

Currencies / British Pound Aug 23, 2017 - 03:05 PM GMT

By: Nadia_Simmons

Currencies

Earlier today, the British pound extended losses against the greenback, which pushed GBP/USD to a fresh multi-month low. How low could the exchange rate go in the coming days?


EUR/USD

Looking at the charts, we see that although EUR/USD moved a bit lower, the exchange rate is still trading around 38.2% Fibonacci retracement and the 112.8% Fibonacci extension. Nevertheless, the pair closed the previous week above the retracement and invalidated the earlier tiny breakdown under this support. Earlier this month, we saw a similar situation, which suggests that one more upswing and a re-test of the recent highs can’t be ruled out in the coming days.

Very short-term outlook:  mixed
Short-term outlook: mixed
MT outlook: mixed
LT outlook: mixed

Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.

GBP/USD

On Wednesday, we wrote that GBP/USD slipped to the lower border of the brown rising trend channel, which could encourage currency bulls to act.

But will we see such price action? In our opinion, it’s quite doubtful, because even if the exchange rate rebounds slightly from current levels, we should keep in mind all bearish technical factors. Firstly, the sell signals generated by the weekly indicators remain in place, supporting currency bears and further declines. Secondly, when we take a closer look at the daily chart (…), we see that the sell signals generated by the daily indicators also support lower values of GBP/USD.

Thirdly, the pair moved sharply lower (…) and broke below the 50% Fibonacci retracement yesterday, which resulted in a slip slightly below the 61.8% retracement. Fourthly, GBP/USD remains well below the yellow resistance zone and the lower border of the purple rising wedge. All the above-mentioned negative factors increase the probability that we’ll see a realization of the bearish scenario (…)

From today’s point of view, we see that although GBP/USD increased yesterday, currency bears took control earlier today, which triggered a pullback. As a result, the exchange rate dropped below the 61.8% Fibonacci retracement making our short positions even more profitable. Taking into account today’s price action and a drop below the lower border of the brown rising wedge marked on the weekly chart, we believe that we’ll see a realization of the bearish scenario from our Forex Trading Alert posted on August 7, 2017:

(….) if GBP/USD extends declines from current levels, we’ll see a drop to (at least) 1.2748, where the size of the downward move will correspond to the height of the rising wedge and where the 76.4% and 78.6% Fibonacci retracements are.

Very short-term outlook:  bearish
Short-term outlook: bearish
MT outlook: mixed with bearish bias
LT outlook: mixed

AUD/USD

From today’s point of view, we see that the overall situation remains almost unchanged as AUD/USD is still trading in the purple rising trend channel between the yellow and orange zone seen on the weekly chart. What’s next? In our opinion, that even if the pair moves a bit higher from here (to the upper border of the purple rising trend channel marked on the daily chart), the current position of the weekly and daily indicators (the sell signals) suggests that the space for increases seems limited and bigger move to the downside may be just around the corner. If this is the case and we’ll see more reliable bearish factors, we’ll consider opening short positions.

Very short-term outlook: mixed
Short-term outlook: mixed
MT outlook: mixed
LT outlook: mixed

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Thank you.

Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski
Founder, Editor-in-chief

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Disclaimer

All essays, research and information found above represent analyses and opinions of Nadia Simmons and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Nadia Simmons and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Nadia Simmons is not a Registered Securities Advisor. By reading Nadia Simmons’ reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Nadia Simmons, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.


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