By Mohammed Isah of fxtechstrategy.com
: The pair at last has pushed through its Oct 13. low/range lows at 1.5706, breaking out of its broader sideways range and setting the stage for further weakness toward 1.5276, its .50 Fibonacci retracement (1.3501-1.7041 rally).
To view a chart of the pair,
After triggering a medium-term upward trend off the 1.3652 level last March, the pair has been trapped in a wide range between 1.7041 and 1.5706.
Having made two failed attempts to resume that upward trend in August and November, the pair tumbled and declined to a low of 1.5830 in late December before backing off to recover to a high of 1.6456 on Jan. 19. That recovery subsequently faded, and the pound collapsed again, culminating in the break of the 1.5706 level on Friday.
As stated above, risk points lower toward 1.5276. A break and hold below that level would push the pair lower still, toward its early May 2009 low at 1.5057 and then its .618 Fibonacci retracement (1.3601-1.7041 rally) at 1.4858.
The range pattern target resides at 1.4371, based on measuring the width of the range and projecting from the breakout point.
The weekly relative strength index is bearish and pointing lower, suggesting further weakness.
On any recovery from present price levels, the eroded support at 1.5706 is expected to reverse roles and provide resistance, turning the pair lower again.
However, if the pair manages a recovery through that level, its Dec. 30 low at 1.5830 will come in as the next upside objective ahead of 1.6068, its Feb. 3 high.
On the whole, with the pair out of its broader sideways range, the risk of further downside weakness is high.
Mohammed Isah is a technical strategist and head of research at FXTechstrategy.com, a technical-research Web site. He has been trading and analyzing the foreign exchange market for the past seven years. He formerly traded stocks before crossing over to the forex market, where he worked for FXInstructor LLC as a technical analyst and head of research before joining FXTechstrategy.com. He has written extensively on the forex market and technical analysis and his articles have been featured in The Technical Analyst Magazine, The Forex Journal Magazine, The International Business Times and FXstreet.com. At FXTechstrategy.com, he writes daily, weekly and long-term technical commentaries on currencies and commodities, which are offered to its clients. He also produces
for his subscribers. He provides full coverage of the forex market with specific focus on G10 currencies as well as the commodities markets, with focus on five key commodities.