John J Hardy
Eurozone and German PMIs both better than expected, data from France a little disappointing but overall it's good news for the Euro.
Article / 10 December 2012 at 12:57 GMT

Tactical GBPUSD scenario from here

John J Hardy John J Hardy
Head of FX Strategy / Saxo Bank

The GBPUSD sell-off rejected the previous move above 1.6050 and is a challenge to the bulls in the shortest term. Today, let’s look at a possible further consolidation scenario from here.

GBPUSD found a solid resistance area recently at around the 1.6050 level, an area that it poked at three times late in November before taking it out early last week with a move that topped out above 1.6130. Then the sequence above the 1.6050 level was subsequently rejected with the USD rally late last week, suggesting that the overall rally from the sub-1.5850 base is weakening.

If we are to look for a three wave correction sequence, then the current small rally wave – a second or B wave – may find resistance ideally at the 61.8% retracement level around 1.6080 (red Fibo retracement lines shown in chart below), followed by a 100% extension or C-wave that could have a look down at 1.5950 (shown with blue Fibo extension lines if  the pair does indeed go up to have a look at the ideal rectracement level). If the highs are in for now on that small rally at this old 1.6050 area that proved so important in the recent past, then the extension could poke closer to 1.5925 if we follow through lower here right away.

Of course, we have important event risks in the pipeline that could push the USD around in other ways than the scenario outlined above – these are merely tactical points of interest on the chart to be aware of. If risk appetite improves and the USD weakens on the other side of the FOMC meeting Wednesday, and GBPUSD moves back above 1.6100 and hangs in there, it is more suggestive of a higher range holding and possibly a follow-through move higher, with 1.6000 as the important local support.



Consultant Consultant
I object to this scenario.
GBPUSD is going to revisit 1.6142 and 1.6150 first, the system clearly shows. It won't plummet anywhere near 1.5950 because it would not be low enough. Always the game is for a reason, not for a Fibonacci.
Fibonacci is no reason at all, it is abstract like 2+2=4.
On the low side the game is for 1.5917 and then 1.5881 followed by 1.5869.
None of those is a Fibonacci level.
Do you think that at the current spot rate 1.6069 buyers will give up hitting 1.6142 and 1.6150 being so near?
My prediction is that GBPUSD breaks through 1.6097 and climbs to 1.6142 and 1.6150.
All these price levels I present constitute the inner built memory of GBPUSD.

GBPUSD having done so what I see will force you to apply Fibonacci anew. Because Fibonacci is a tool, not a determinant.
My price levels will not change because they are the determinants of the system.
kirshan kirshan
Interesting theory consultant - I like your post, interesting to see how GBP pans out - im holding a long position from 1.6060 TP @ 1.6173


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