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GBP makes Massive Move, is 1.4000 next big target?

Friday, 24 October 2008 16:32

The GBP/USD fell sharply today and bounced 643 points to take the pair to multi-year lows. Because the pair has moves so far this month, we have to go to longer and longer charts to try and find landing spots. The monthly chart below shows the most intriguing things.

If the month closed today, this would be the 3rd largest monthly move from open to close in 362 months October and September of 1992 are 1 and 2 respectively. However looking at today’s

Bounce away from 1.5265 to close at 1.5908 represents a 643 point bounce. It would only take a mere 389 point drop, little more than half of today’s bounce, to take the number 1 spot.

forex chart

If we are looking for a comfort

Range to settle in, than the one between 1.7150 and 1.4006 looks solid.
forex chart

In the following chart, you are presented with a month that is almost certainly going to close below the 61.8 Fibo retrace line from 2001 low to the 2007 high. This brings the 100%

Retracement line into the realm of possibilities. That’s right, another 19 cents lower to find previous support around 1.4048 lows from 2001, 1992 and bits of 1986.
forex chart

The GBP/USD technically has scope for a lot further drop in price action. If the past holds any resemblance to the future, which as a technician we count on, only two options are available.
1. We can look at the last three months drop as finding the final value placement and look for 1.6550-1.5530 range as shown in the following chart, which has minor support sprinkled throughout.
2. A couple of months work ahead to slide down to the 1.4000 area as it did in 1992 after plummeting from the 2.0000 range. Does that look familiar? This is the option I am favoring for now.
Either way, 1.4000 looks almost certain to print in the coming year.
forex chart