A number of reasons to assign a Fair Value estimate to GBP/USD at 1.5600’s. The first is the new periodic start to current 4th quadrant began with the 2008 crash and fall for GBP/USD at 1.8600’s. The comporable 3000 pips from 1.5600’s to 1.8600 on the downside is found at 1.2600’s. Secondly, the 5 year average at 1.5671 is massively oversold and as much as the 200 day average. In relation to 1.2600, last Friday”s Carney comments installed a floor in GBP/USD at 1.3000 and 1.3100 and for the past week, GBP built a solid and rising base at 1.2974 as of today. Lastly, the channel top for July is located at 1.6101 and 1.6069. In order for price to see channel tops then GBP/USD must cross 1.5445, 1.5500’s and 1.5670’s.
With respect to DXY and GBP/USD, the bottoms for July are found at the DXY V GBP/USD 9 and 10 year lines at 1.3052 and 1.2961. Only the 9 and 10 year averages are in range and offer the first upside targets at 1.3683 and 1.3746. In order for GBP/USD to find inside any respective shorter term range then price must cross higher at 1.3816, 1.3894, 1.3991, 1.4012 and 1.4177. The current 2 year monthly average at 1.5133 sees first inside range at 1.4821 to offer how far GBP/USD fell from Brexit.
Not only does GBP/USD trade below every monthly average from 1 to 10 years but it trades below the 15 and 16 year averages to offer further context.
The average of the ranges from 1 to 10 year monthly averages is located at 748 and 601 pips. To exclude the 1200 and 1500 wide ranges from 9 and 10 year averages then actual ranges are found from 581 to 571. From GBP/USD 1.3200’s, bottoms would be located at 1.2700 and 1.2600 and the upside at 1.3700’s and 1.3800’s. Any upside to GBP/USD will find a reluctant follower in EUR/USD as those range pips are located at 205 and 224 pips with a big break point from monthly averages at 1.1454.
The monthly strategy is rather than short due to severe oversold but long any and all drops
Brian Twomey, Inside the Currency Market, btwomey.com Contact: email@example.com