2016-10-04 12:40:58

Review and dynamics
Yesterday’s positive US macro-economic statistics and increasing concerns of the heavy impact on the UK economy caused the decline in the pair GBP/USD today. The pair has reached the lows of the past 30 years.

The pair GBP/USD has broken down the lower limit of the range at the level of 1.2875 and continues to decline. The level 1.3365, (upper limit of the range) corresponds to Fibonacci 23.6% to the decline in the pair after Brexit referendum and the level of 1.2875 is the lows of 2016). The pair GBP/USD has been traded in this range since the beginning of July.

Earlier this summer the Bank of England has lowered interest rate, expanded the program to stimulate economy, and has lowered GDP growth forecast for the next few years.

Our opinion
On 4 hour, daily, weekly and monthly charts the indicators OsMA and Stochastic give signals for short positions.

In the previous review, it was mentioned that on the weekly chart the pair GBP/USD is in the descending channel with the lower limit below the level of 1.2600. Breakout of the support level of 1.2875 will cause further decline in the pair GBP/USD in the descending channel. It seems that this prediction is going to become true.

The difference in the monetary policies of the Bank of England and the US Fed and concerns of the slowdown of economic growth in the UK because of Brexit, will put pressure on the pair GBP/USD.

As an alternative scenario the pair may grow but only after the rise in the pair GBP/USD above the level of 1.2875.

Breakout of the level of 1.3365 and the rise in the pair GBP/USD to the levels of 1.3630 (lows of 2009, 2001, the closing price of "black Friday") and 1.3655 (Fibonacci 38.2%) can trigger further rise and the change of the negative trend in the pair.

Support levels: 1.270 and, 1.2600.
Resistance levels: 1.2875, 1.2900, 1.3100, 1.3365, 1.3445, 1.3480, 1.3500, 1.3630 and 1.3655.

Trading tips
Sell on the market. Stop-Loss: 1.2820. Take-Profit: 1.2700 and 1.2600.
Buy Stop: 1.2820. Stop-Loss: 1.2770. Take-Profit: 1.2875, 1.2900, 1.3100, 1.3365 and 1.3445.

In the descending channel
In the descending channel

Breakdown of the support level of 1.2875
Breakdown of the support level of 1.2875