From the 1.5000 Brexit fall June 2016 to 1.1900 lows, GBPUSD at 1.2800 ‘s is at its highest levels in 7 months. The mid point of the fall is located at 1.3464. Viewed from longer term 5, 10 and 14 year averages at 1.5159, 1.6036 and 1.6623, GBP was severely oversold in the 1.1900 vicinity and represented the perfect buy point.
Long term averages reveal GBP remains oversold at1.2800’ which means 1.2200 to 1.2500 then GBP will struggle to hold the lows near term until or unless the averages perform a more rapid fall. The current 5 year average at 1.5159 was 1.6300’s at the time of the Brexit fall. Took 7 months for the 5 year to drop 1200 pips and a 150 pip drop per month. The commentary on 1.1900’s and without a serious Brexit correction is the power central banks gained over respective exchange rates. For the past 6 months, GBP/USD ranged from 1.2767 highs to 1.2012 lows in severely oversold territoty in relation to longer term averages.
The problem with current 1.2800’s is longer term oversold averages are fighting against short term severe overbought particularly from strong and rising supports at 1.2397 and 1.2512 and MA’s from 10 to 200 days. The nearest range overall still represents 1.2300’s to 1.2800’s and confirms a significant bottom and long point from 1.2200 to 1.2300’s if seen on a possible French election outcome.
For today, must breaks and resistance for GBP/USD is located at 1.2835, 1.2853 and 1.2884. The top channel is represented by 1.2906. The level at 1.2853 is most significant as GBP runs into a solid USD brick wall. Below 1.2835 then comes 1.2787, 1.2769 and 1.2750 is still in view. To see a major drop then 1.2512 must break over days ahead .
GBP/JPY in the larger GBP/USD scenario constitutes a problem for GBP/USD movements as GBP/JPY prices are contained between and among vital break points. The downside and must break for lower prices is rough at 138.43 while above stiff resistance is found at 139.41, 139.70 then comes 140.39 and 140.46. The point at 140.39 is most important as GBP/JPY runs into a solid JPY wall. Why GBP/JPY focus is its the most vital pair alongside GBP/USD due to consistent Correlations.