From Investor to Scalper is a cycle of analysis in which we take one financial instrument and the analysis includes a detailed look at the value from the monthly/weekly chart to the H1/M15.
Due to announcement of the results of the referendum on 23-06-2016, in which the British with 51.87% of the votes decided to leave the European Union Member States, the market overcame a very important support in the vicinity of 1.3850. As a result of later decreases, the cable’s price was at the lowest levels since May 1985.
Looking strictly technically at the current market situation, the level of 1.3850 could be defined as the neck line of the head and shoulders formation (H&S). Considering the range measured from the head to the neck, we come to the conclusion that potential drops could reach even around 0.6200.
However, taking into account the fact that in line with the principle of changing poles, each level that has been support in the past should be tested as resistance, in the near future we would expect a deepening of the current upward correction and re-test of the already mentioned 1.3850 level, which in addition, it is in the area of 38.2% Fibonacci correction.
The potential growth may also be supported by the fact that due to the current increases, the market has defeated and then tested the line of the last downward trend from the top. There has been a demand reaction and for several weeks the course has been moving north again.
Looking at the daily interval, we notice that the entire upward movement from the beginning of last year is within a channel. In order for the growth to be continued, the pair would have to overcome the technical resistance in which we are currently located.
Breaking this resistance is also supported, among others, with dynamics of increases lasting from yesterday. Although the range of this movement is over 150 pips, if this zone is permanently defeated, we could expect further appreciation even by another 250 pips.
It is worth to look carefully at this currency pair though I would personally be careful with opening long positions at this moment. Despite the next test, resistance has not yet been permanently broken.