GBP/USD 4H Chart: Channel Down

EUR/GBP 1H Chart: Channel Up

Comment: The British Pound is weakening across the board, giving the Euro a good opportunity to outperform it. The main reason to be bullish the common currency, however, is the fact that the pair has recently established an ascending channel, and at the moment it is near the lower boundary of the pattern. In addition, the four-hour indicators are giving ‘buy’ signals and the market is overcrowded with bears (65% of positions are short). Consequently, we expect the price to rebound from 0.76 and start a rally, which will likely extend up to 0.78 before there is a significant retracement. Meanwhile, if the rate dips beneath the trend-line at 0.76, the target will be the 200-hour SMA and daily S3 at 0.7530.

GBP/USD 4H Chart: Channel Down

Comment: Since the last week of December, the Cable has been trading within a narrow but at the same time solid channel. Being that the studies are either bearish or mixed and the Sterling is overbought (63% of positions are long), there are no reasons to expect a reversal but one—the price is at the 2010 low. However, the initial reaction after the test of the historically important level was shallow, meaning demand near 1.4230 is unlikely to be enough to stop the sell-off, and the near-term rallies should be capped by the monthly S2 and the falling trend-line at 1.4390/70. Below 1.4230, the currency pair should aim for support at 1.4050, followed by the 2009 low at 1.35 dollars.

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