GBP / USD - DOES IT NEED A CORRECTION?
Updated
GBP / USD - DOES IT NEED A HEALTHY CORRECTION?
My analysis today deals with how the further course of our popular Forex pair "GBP / USD" could look.
> The technical analysis and selected indicators, confirm the thesis of an imminent sell-off.
= Why, that I explain after the introduction.
The DXY / USD has a non-negligible impact on GBP / USD, as the whole economy depends on its behavior, and it directly competes in composition.
> Meanwhile, this seems to take a run-up, for a final upswing, which could put the currency pair under massive selling pressure.
> Regardless of these selling pressures coming from the USD, GBP / USD has arrived at a very strong support, which suggests a rising price.
In the following, the analysis goes into detail, so that the significant levels and areas are known to you.
For this purpose, I have performed a "MULTI-TIME-FRAME" analysis, which refers to the higher time units (month & week) and thus makes the big picture visible.
Normally all time units below "1h" are called noise, but even a - 1h-4h - analysis is of no use to you, if the knowledge about the big and whole is missing.
> We traders know that no one can predict the future, and that is exactly why you have to be prepared for all initial situations.
> If the DXY should rise again, that means "BLOOD" for the traditional and crypto markets.
> This creates dangers, but also opportunities - it is important to look at the big picture.
> Which levels are RELEVANT, I have explained in detail in the following pages.
Table of contents
1st part = INTRODUCTION
2nd part = TECHNICAL ANALYSIS
= Monthly - Time frame
= Weekly - Time frame
3rd part = CONCLUSION
PART ONE
"INTRODUCTION"
After "GBP/USD" tried to break out of its previously existing downtrend in May|2021, a strong sell-off was subsequently unleashed.
> This sell-off extended to September|2022, where we formed our currently existing low.
> After this significant low of 1.03565 USD (lowest exchange rate since the existence of the GBP), investors' fears subsided a bit and a massive buying of 20.19%, to 1.21534 USD occurred (in less than 2 months).
> Due to this extreme upward movement, we can assume that a correction is overdue. This is needed so that a healthy recapture, an acceptable exchange rate can arise.
> In recent weeks, the strong upward movement has stalled a bit, making the correction I expect more and more likely.
CONTRA | SELL-OFF
= Despite the strong reasons for a sell-off, the price can approach the not yet tested downtrend line, which would be at approx. 1.28 USD.
= In addition, the price has regained a sideways trend channel and has respected it so far.
PRO | SELL-OFF
= The significant Fibonacci level of 0.65 (of the previous upward movement) was reached and tried to be broken twice without success.
= The "DAILY" - MACD + RSI - both show divergences, which further strengthens the correction thesis.
> Once you look at the DXY (USD index) at the higher time levels, the further sell-off in the traditional markets becomes even more likely.
(My DXY analysis is linked below this post, for confirmation purposes).
SECOND PART
TECHNICAL ANALYSIS
For the analysis of the higher time levels, I proceed according to the onion-skin principle.
> MONTH - level > WEEK - level > DAY - level
These are divided into
> SUMMARY > CHARTS
The charts are presented in logarithmic scaling, as the given information can be visually presented in a more harmonious way.
(This also refers to Fibonacci levels.)
1st MONTH – Time frame
SUMMARY
The trend channel shown in the chart, in turquoise, finds its root in 1972 and has been able to maintain itself as a legitimate trend channel since then. Its mid-trend line showed reactions when confronted and was respected by the market.
> The price is in the area below the mean line and had unsuccessfully challenged it in 2021.
The trend channel shown in the chart, in purple, formed since 1976 and represented a hidden sideways channel.
> The price is far from the channel and will not provoke a confrontation in the coming months.
The trend line drawn in the chart, golden, has its origin in 2007 and proved to be a very strong resistance.
> The price challenged this between "early 2021 - to early 2022" unsuccessfully and subsequently experienced its strong sell-off.
As we go into more detail about the "SUPPLY & DEMAND" zones, you can take a closer look at the following "DEMAND" + "SUPPLY" zones on the chart.
> The "DEMAND" zone 1, is STRONG = Played a role in the last bottom formation.
> The "DEMAND" zone 2, is VERY STRONG = Played a role in the last bottoming out.
> The "SUPPLY" zone 1, is STRONG = followed a strong move + it goes along with the mid-trend line of the largest trend channel (origin | 1972)
The Fibonacci retracements should serve us as additional confirmation, and have been taken into account in past movements (last decades).
> FIB 1 | will serve as resistance should the price attempt another run-up.
> FIB 2 | represents all relevant levels, for a possible sell-off.
Past highs and lows usually serve as resistance/support, one of which we have.
> OLD LOW | 03/2020
> OLDEST LOW | 1985
Some levels of interest are in front of us, which in the last months + years, played a strong role for the market.
> The most relevant at the moment - POIs are (1.20 + 1.185 USD) - and have been an important mark since the year 1984. In addition, they currently take a very strong support role.
> The other POIs are by no means negligible and will play a role in the price development in the coming days, weeks and months. (Therefore, take your time and transfer the ones that are relevant for you into your chart).
OVERVIEW
CURRENT RELEVANT
CHARTS
Overall picture without POIs + without FIBONACCI
Overall picture without POIs
Overall picture without FIBONACCI
ATTENTION
In the following time levels, I will only deal with the NEW, added elements..
2nd WEEK – Time frame
SUMMARY
IN ADDITION TO THE ALREADY ANNOUNCED TREND CHANNEL + TREND LINES, FURTHER VISIBLE.
The trend channel shown in the chart, purple, finds its root in 2016 and since then has been able to maintain itself as a legitimate trend channel. Its mid-trend line showed reactions when confronted and was respected by the market.
> The price is in the lowest area of the channel and had regained it. Despite the successful recapture, the price does not seem to be able to hold this position for much longer.
The trend lines, drawn in the chart, have the following characteristics.
> The - golden - older line served as an excellent support line in the past and was only temporarily broken in 2022 by a "fake-out".
> The - golden - line with the shorter history is our current down-sale trendline and would come into play in case of a further rise.
> The - turquoise - line will serve us as a "POI support line" during the following correction, as it represented a strongly contested area in the past.
The monthly "SUPPLY & DEMAND" zones are joined by others from the weekly view that coincide with other resistance / support elements.
> The "DEMAND" zone 1, is VERY STRONG = followed a strong move + was not tested by the price so far + is covered by a monthly demand zone
> The "SUPPLY" zones 1+2+3, are WEAK = each followed a Weak move and do not receive additional overlap from a Monthly Supply Zone
> The "SUPPLY" zones 4, is VERY STRONG = followed a very strong movement + is covered by a monthly supply zone
As further Fibonacci additions, we have four more elements:
> FIB 1 | will serve as support, but should not be of great relevance.
> FIB 2 | represents a possible target level, for a possible sell-off.
> FIB 3 | represents all possible correction levels, for a possible sell-off.
> FIB 4 | represents all possible levels for a further price increase.
CHARTS
Overall picture
Overall picture without FIBONACCI
THIRD PART
CONCLUSION
"Is the pound losing its global position as one of the strongest currencies?"
If you answered YES to this question, let's look into the reason.
> Do you think this is only due to BREXIT, or is the reason a bit more complex?
> Let me know in the comments what you think could be another reason and will be in the future.
In summary, based on technical analysis, there are strong reasons for a correction.
> Since the second attempt to break the 0.65 FIB, less and less strength is showing in the GBP.
> A possible break of the resistance elements is not impossible, but highly unlikely.
> The divergences in the daily RSI + MACD, suggest a bearish sell-off.
For this reason, I assume a weak GBP exchange rate and a strong USD and an accompanying sell-off in the traditional and crypto markets.
> Positioning after confirmation of this thesis = SHORT.
If this idea and explanation has added value to you, I would be very happy to receive an evaluation of the idea.
Thank you and happy trading!
ZIEL IST DIE AUTARKIE | THE GOAL IS SELF-SUFFICIENCY
My analysis today deals with how the further course of our popular Forex pair "GBP / USD" could look.
> The technical analysis and selected indicators, confirm the thesis of an imminent sell-off.
= Why, that I explain after the introduction.
The DXY / USD has a non-negligible impact on GBP / USD, as the whole economy depends on its behavior, and it directly competes in composition.
> Meanwhile, this seems to take a run-up, for a final upswing, which could put the currency pair under massive selling pressure.
> Regardless of these selling pressures coming from the USD, GBP / USD has arrived at a very strong support, which suggests a rising price.
In the following, the analysis goes into detail, so that the significant levels and areas are known to you.
For this purpose, I have performed a "MULTI-TIME-FRAME" analysis, which refers to the higher time units (month & week) and thus makes the big picture visible.
Normally all time units below "1h" are called noise, but even a - 1h-4h - analysis is of no use to you, if the knowledge about the big and whole is missing.
> We traders know that no one can predict the future, and that is exactly why you have to be prepared for all initial situations.
> If the DXY should rise again, that means "BLOOD" for the traditional and crypto markets.
> This creates dangers, but also opportunities - it is important to look at the big picture.
> Which levels are RELEVANT, I have explained in detail in the following pages.
Table of contents
1st part = INTRODUCTION
2nd part = TECHNICAL ANALYSIS
= Monthly - Time frame
= Weekly - Time frame
3rd part = CONCLUSION
PART ONE
"INTRODUCTION"
After "GBP/USD" tried to break out of its previously existing downtrend in May|2021, a strong sell-off was subsequently unleashed.
> This sell-off extended to September|2022, where we formed our currently existing low.
> After this significant low of 1.03565 USD (lowest exchange rate since the existence of the GBP), investors' fears subsided a bit and a massive buying of 20.19%, to 1.21534 USD occurred (in less than 2 months).
> Due to this extreme upward movement, we can assume that a correction is overdue. This is needed so that a healthy recapture, an acceptable exchange rate can arise.
> In recent weeks, the strong upward movement has stalled a bit, making the correction I expect more and more likely.
CONTRA | SELL-OFF
= Despite the strong reasons for a sell-off, the price can approach the not yet tested downtrend line, which would be at approx. 1.28 USD.
= In addition, the price has regained a sideways trend channel and has respected it so far.
PRO | SELL-OFF
= The significant Fibonacci level of 0.65 (of the previous upward movement) was reached and tried to be broken twice without success.
= The "DAILY" - MACD + RSI - both show divergences, which further strengthens the correction thesis.
> Once you look at the DXY (USD index) at the higher time levels, the further sell-off in the traditional markets becomes even more likely.
(My DXY analysis is linked below this post, for confirmation purposes).
SECOND PART
TECHNICAL ANALYSIS
For the analysis of the higher time levels, I proceed according to the onion-skin principle.
> MONTH - level > WEEK - level > DAY - level
These are divided into
> SUMMARY > CHARTS
The charts are presented in logarithmic scaling, as the given information can be visually presented in a more harmonious way.
(This also refers to Fibonacci levels.)
1st MONTH – Time frame
SUMMARY
The trend channel shown in the chart, in turquoise, finds its root in 1972 and has been able to maintain itself as a legitimate trend channel since then. Its mid-trend line showed reactions when confronted and was respected by the market.
> The price is in the area below the mean line and had unsuccessfully challenged it in 2021.
The trend channel shown in the chart, in purple, formed since 1976 and represented a hidden sideways channel.
> The price is far from the channel and will not provoke a confrontation in the coming months.
The trend line drawn in the chart, golden, has its origin in 2007 and proved to be a very strong resistance.
> The price challenged this between "early 2021 - to early 2022" unsuccessfully and subsequently experienced its strong sell-off.
As we go into more detail about the "SUPPLY & DEMAND" zones, you can take a closer look at the following "DEMAND" + "SUPPLY" zones on the chart.
> The "DEMAND" zone 1, is STRONG = Played a role in the last bottom formation.
> The "DEMAND" zone 2, is VERY STRONG = Played a role in the last bottoming out.
> The "SUPPLY" zone 1, is STRONG = followed a strong move + it goes along with the mid-trend line of the largest trend channel (origin | 1972)
The Fibonacci retracements should serve us as additional confirmation, and have been taken into account in past movements (last decades).
> FIB 1 | will serve as resistance should the price attempt another run-up.
> FIB 2 | represents all relevant levels, for a possible sell-off.
Past highs and lows usually serve as resistance/support, one of which we have.
> OLD LOW | 03/2020
> OLDEST LOW | 1985
Some levels of interest are in front of us, which in the last months + years, played a strong role for the market.
> The most relevant at the moment - POIs are (1.20 + 1.185 USD) - and have been an important mark since the year 1984. In addition, they currently take a very strong support role.
> The other POIs are by no means negligible and will play a role in the price development in the coming days, weeks and months. (Therefore, take your time and transfer the ones that are relevant for you into your chart).
OVERVIEW
CURRENT RELEVANT
CHARTS
Overall picture without POIs + without FIBONACCI
Overall picture without POIs
Overall picture without FIBONACCI
ATTENTION
In the following time levels, I will only deal with the NEW, added elements..
2nd WEEK – Time frame
SUMMARY
IN ADDITION TO THE ALREADY ANNOUNCED TREND CHANNEL + TREND LINES, FURTHER VISIBLE.
The trend channel shown in the chart, purple, finds its root in 2016 and since then has been able to maintain itself as a legitimate trend channel. Its mid-trend line showed reactions when confronted and was respected by the market.
> The price is in the lowest area of the channel and had regained it. Despite the successful recapture, the price does not seem to be able to hold this position for much longer.
The trend lines, drawn in the chart, have the following characteristics.
> The - golden - older line served as an excellent support line in the past and was only temporarily broken in 2022 by a "fake-out".
> The - golden - line with the shorter history is our current down-sale trendline and would come into play in case of a further rise.
> The - turquoise - line will serve us as a "POI support line" during the following correction, as it represented a strongly contested area in the past.
The monthly "SUPPLY & DEMAND" zones are joined by others from the weekly view that coincide with other resistance / support elements.
> The "DEMAND" zone 1, is VERY STRONG = followed a strong move + was not tested by the price so far + is covered by a monthly demand zone
> The "SUPPLY" zones 1+2+3, are WEAK = each followed a Weak move and do not receive additional overlap from a Monthly Supply Zone
> The "SUPPLY" zones 4, is VERY STRONG = followed a very strong movement + is covered by a monthly supply zone
As further Fibonacci additions, we have four more elements:
> FIB 1 | will serve as support, but should not be of great relevance.
> FIB 2 | represents a possible target level, for a possible sell-off.
> FIB 3 | represents all possible correction levels, for a possible sell-off.
> FIB 4 | represents all possible levels for a further price increase.
CHARTS
Overall picture
Overall picture without FIBONACCI
THIRD PART
CONCLUSION
"Is the pound losing its global position as one of the strongest currencies?"
If you answered YES to this question, let's look into the reason.
> Do you think this is only due to BREXIT, or is the reason a bit more complex?
> Let me know in the comments what you think could be another reason and will be in the future.
In summary, based on technical analysis, there are strong reasons for a correction.
> Since the second attempt to break the 0.65 FIB, less and less strength is showing in the GBP.
> A possible break of the resistance elements is not impossible, but highly unlikely.
> The divergences in the daily RSI + MACD, suggest a bearish sell-off.
For this reason, I assume a weak GBP exchange rate and a strong USD and an accompanying sell-off in the traditional and crypto markets.
> Positioning after confirmation of this thesis = SHORT.
If this idea and explanation has added value to you, I would be very happy to receive an evaluation of the idea.
Thank you and happy trading!
ZIEL IST DIE AUTARKIE | THE GOAL IS SELF-SUFFICIENCY
Note
The price has run in the opposite direction of my assessment and is currently close to a breakout.Meanwhile, between a further rise is the SUPPLY ZONE (W-2) (= LEVEL | 1.26500), which would clear the way to the next SUPPLY ZONE (W-2) (= LEVEL | 1.30000) after a successful breakout.
At the 1.30 a strong resistance is waiting, which is strengthened by the HTF - FIB Level | 0.786.
SCENARIOS
1. The USD gains strength again and the third attempt of the GBP runs out, which would be reflected in a sell-off.
2. The USD continues to lose strength and the third attempt succeeds the GBP = after successful breakthrough (confirmation in HTF), we run to the next target level of 1,30.
The decision to proceed will depend on the performance of the DXY.
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