Hello dear readers and followers, please look at the 15 mins chart (Chart #1) shows that there is a potential support setup at 1.5171. This level, in case it actually is tested, will be expected to be a strong support, since it combines a Fibonacci level with a trend line that could be the lower line in a wedge formation. This wedge formation is far from complete, and therefore we can only say that this could potentially happen, but of course, it is not a must. Nevertheless, this situation points to 1.5171 as an important support, and if we test it anytime today or later, we need to keep that in mind.
After the Pound topped at a 5-week high at 1.5352 on Friday, it gave up and fell down, reaching 1.5196 yesterday. I have redrawn the daily channel (Chart #2), using the bottoms first, and taking a parallel line and putting it on the “Scottish referendum” high seen in September. The result if a very good looking channel, with Friday’s high being a very accurate touch of the upper trend line in this channel. Taking another parallel line, and putting it on July’s 6-year high, result in a major resistance at 1.5400.
These 2 levels at 1.5320 & 1.5400 are both extremely important medium term resistance levels. Breaking above 1.5320, is a first sign of strength, while a break above 1.5400 is a much stronger one. A break above this level would significantly boost the bullish potential on both the short & medium terms, and would make it logical to expect the price to target at least one of the medium term retracement levels, which start at the first level 1.5475 followed by the first Fibonacci level at 1.5552.
Closer resistance levels the falling trend line from Friday’s high, which is currently running at 1.5255 (this is the upper trend line in the supposed wedge formation). A break above this level would be a first sign of strength, which would open the way higher towards the micro term retracements at 1.5274, 1.5292 & the important 1.5307. A break above 1.5240 would be a first sign of strength, while breaking above each micro term retracement takes us closer to yet another test of the very important 1.5320, and maybe even a test of the key support 1.5400.
As for the support, first we have a minor Fibonacci level at 1.5226, ahead of a more important level at yesterday’s low 1.5196. However, the most important support for today in my opinion is 1.5171. A break below this level would be a weakness sign, and would probably target at least one of the rest micro term levels 1.5145, 1.5128 & 1.5093, where the price could find support again, at least temporary. As it is always the case with retracements, a bottom very close to any of those levels would be a strength sign, while breaking below each of them would be a sign of weakness. A break below the last level would be a serious sign of weakness, and should open the way lower towards 1.5041 ahead of another test of the double bottom level 1.4989. This level has survived twice, and surviving a third time will not be very probable. A break below it would indicate the bears’ ability to dig deeper below last month’s 19-month low 1.4951. Please be careful about yesterday news related to "BREXIT" issues for deeper bearish in mid-term. Probably in Q2 or earlier
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