The British Pound (GBP) rallied strongly into early December to just below 1.99, and within touching distance of £/$2.00. The sideways trend which had the appearance of being corrective in the run up to another assault higher, which started as we came into the New Year. That assault failed at 1.9750, and changes the picture as the Pound drifts down to its current level of 1.9511

Technical Analysis

Price Pattern - The corrective pattern along the high is failing and turning into a topping pattern, which suggests a correction equal to the height of the pattern or about 4cents, off of the 194 low, thus targeting 190.
Support - Heavy support lies across the highs of 1.9000, 1.9150 and 1.9190. There also exists heavy congestion zone around 1.90
MACD - (Bottom indicator) The MACD was overbought going into the early December high and since turned down as the overbought state was being unwound during the correction. The MACD is currently not at a level that calls an end to the correction, and thus the break lower suggests a trend to 1.90.
Trendline's-The support trendline is currently at 188.60, rising to 18950 by the end of January.
Time - The correction still has about 3 weeks to run, and given the recent break lower, this suggests that the trend will be lower to below 1.90.

Conclusion - The GBP is targeting a trend to 1.90 or to slightly below 1.90 by late January 07. At this point the move resembles an extension to the correction of the up trend, i.e. it would set the scene for the Pound to make a low and mark another assault on £/$ 2.00 and possibly breach it.

by Nadeem Walayat

Disclaimer - This Analysis / Forecast is provided for general information purposes only and not a solicitation or recommendation to enter into any market position, and you are reminded to seek independent professional advice before entering into any investments or trading positions.

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