From Investor to Scalper – series of studies created in cooperation with broker BDSwiss, in which we take a financial instrument and the analysis includes a detailed look at the value from the monthly chart and ending with H1/M15.
Along with the announcement of the results of the referendum 23-06-2016r., in which 51.87% of voting Britons decided to leave the European Union, market overcame a very important support level around 1.3900. Since then we are below that level and the current rate is the lowest since May 1985.
Looking strictly technically on the current market situation, the level of 1.3900 could be described as a formation of the neck line of head and shoulders (H&S). Taking into account the range measured from the head to the neck we come to conclusion that the potential drop could reach even around level of 0.6200.
Taking into account the fact that according to the rules of changing polarity each level, which in the past was the support, after the defeat should be tested as resistance – in the near future we could expect bullish correction and re-test of the already mentioned level 1.3900, which coincides with measuring of the 38.2% Fibonacci correction.
Looking at the weekly chart we see that around the level of 1.3900 is also level of 61.8% Fibonacci correction of last year’s decline.
A pro-growth scenario also suggests non closed for more than 30 weeks bearish gap, which before further declines market should at least try to shut.
As a result of Sunday’s press releases from 15 January concerning Tuesday’s conference, British Prime Minister, Theresa May, who spoke about the exit of her country from the European Union market opened last week with close to 170 pips downward gap.
From the very beginning we observed growth and efforts to fill the gap, which is a result of a dynamic strengthening of the pound sterling caused by last week’s statement of British Prime Minister, Theresa May, who presented the plan of Brexit. The gap was completely closed on Tuesday.
If the growth will continue in the near future we expect to test significant resistance zone between the levels of 1.2770 – 1.2870.
Looking at the chart H4, we see that as a result of ongoing growth market last week defeated the last significant resistance 1.2500, which is now re-testing from the top (as support). The rejection of this level would be a signal for the continuation of growth in near future although it is worth remembering that the market has not tested defeated earlier level 1.2420.
On H1 chart, we see that the reaction of demand appeared today in the area of local support but this does not mean that in near term the market is not tempted to test again the uptrend line.
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