GBP/USD
The recovery faced problems late last week topping extremely close to the short-term Fibonacci 38.2% level at 1.6275. A look at the attached chart illustrates that this level is also very close to the bottom of the previous falling trend channel. This will be our resistance for today.
If the Pound is to continue recovering from 1.6250 it must break above this level, the sooner the better. Failure at this level will most probably be followed by another drop to a new multi-month low, and may be a test of the key Fibonacci level at 1.6001. The support which will indicate weakness in case it is broken is the current daily low 1.6228. A break of either 1.6276 or 1.6228 should give us more clues on the short term position of the Pound.
If 1.6276 gives way, the rising correction from 1.6050 will continue. First target for this break would be 1.6327, which will fill the gap seen last week. Above here we have the rest of the short term Fibonacci retracements at 1.6346, 1.6416 and 1.6473. A break above the latter is unlikely for now, but in case it actually happens, the first target for such an important break would be 1.6620.
On the other hand, it 1.6228 gives way, then chances are that we have seen an important top at Thursday’s high, from which we will drop to test 1.6001. The first target for breaking 1.6228 would be 1.6189, followed 1.6163, 1.6136 and the important 1.6114. A break below 1.6114 would confirm that the price is targeting a test of 1.6001.
Aside from the technical, the Pound’s great event this week is the Scottish independence referendum, which is due this Thursday. This event is expected to influence trading the Pound all through this week. Caution is advised.
