The forex markets had a full week to respond to the reality of Brexit, which is a game changer with an impact that has yet to be fully determined or credibly quantified. The only thing we know for sure is that traders and investors hate uncertainty.
The GBP/USD (British pound vs US dollar) closed out the month of June with a violation of support at the neckline of its 20-year monthly head and shoulders pattern.
As Brexit is a game changer and will have long-term implications for Great Britain, I prefer to look at longer-term charts as we are clearly in uncharted territory (no pun intended) now.
However, one would have to reach back into the 1980s to determine the pound's next low, which incidentally is close to parity with the dollar. Technically, this would be the next level of support. Logically, dropping so precipitously is very unlikely, although anything is possible.
Instead, it is more probable that the market will decline incrementally. For guidance on potential support and resistance levels over the current trading week and the month of July, one may want to use our weekly and monthly pivot point tables (see below).
Monthly and weekly resistance for the pound is respectively at 1.3682 and 1.3488. In terms of support, the monthly S1 level remains intact at 1.2347, while the weekly S2 at 1.2903 could be the next challenge test for the pound. Negative momentum has accelerated rapidly and warrants further caution.
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