With the announcement of the results of the referendum on 23-06-2016, in which the British voted 51.87% to leave the EU Member States, the market beat very important support at 1.3850 level. As a result of subsequent falls, the price of the cable was at its lowest level since May 1985.
Looking strictly from technical point of view at the current market situation, the 1.3850 level could be defined as the neck line of H&S formation.Taking into account the range measured from head to neck, we come to the conclusion that potential drops could reach even around 0.6200.
But when taking into account, that in keeping with the principle of changing poles, any level that has been supported in the past should be tested as a resistance after being defeated, in the near future we should be able to deepen the current upward correction and re-test the already mentioned 1.3850 level. In addition, it is located in the area of 38.2% Fibonacci correction.
The bullish scenario may also be supported by the fact that, as a result of the current upswings, the market has beaten and then tested the upper line of the recent trend from above. Permanent rejection of this support could open the way to further growth.
Looking at the 4-hour chart, however, we note that in the short-term, the situation is more bearish. As a result of declines lasting from 22 September, the pair reached area of the previous downward trend line, where two weeks ago there was a demand response. However, the growth was only to the level of 1.3300 and we have seen declines again since last Friday. The current poor retail data from the UK published today is not improving the situation on charts, as we have seen depreciation of the GBP.
So it may depend on whether the support currently tested is permanently defeated or rejected. However, considering the dynamics of recent declines, it seems more likely that this will happen first.
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