GBP/USD Forecast December 7, 2016, Technical Analysis

The British pound initially tried to rally on Tuesday but found enough resistance above to turn things around and form a bit of a shooting star. Because of this, it’s likely that the markets will break down from here and perhaps try to find buyers below. What I find particularly interesting is that the area that we turned around that is the 50% Fibonacci retracement level. Because of this, I believe that the market will attract a certain amount of sellers anyways. I think will probably reach towards the 1.2550 level, or maybe even 1.26. At this point, the channel still remains intact, so it’s likely that we will find support below. Ultimately, it’s probably only a matter time before we break down significantly but I’m not overly concerned with going long anyway. I believe that the market will continue to worry about the accident of course more importantly at this point, the possibility of the Federal Reserve raising interest rates several times.
There will be a lot of aches and pains with the withdrawal of the day kingdom from the European Union, so I think that it makes quite a bit of sense that the British pound will be able to take off completely. Because of this, I think that these pullbacks will continue to be very interesting. If we can break down below the 1.25 level, at that point I think that we will go much lower. Although we have had a nice bounce, the reality is that just 2 years ago we were and the 1.74 level, and as a result we are still very much in a downtrend. I believe that we will have quite a bit of volatility, but I believe that any point you can have a sudden turnaround and a collapse. Because of this I am not comfortable buying. I think that when this pair breaks to the upside, you may want to look at the GBP/JPY as a bit of a proxy for this pair as at least you can make a serious argument for the Japanese yen falling over the longer term as opposed to the US dollar.