The Downtrodden Pound Sits On The Edge Of Another Prolific Decline

Daily Forex Technicals | Written by DailyFX | Jan 22 09 15:09 GMT |

The British pound has been driven to multi-decade and record lows against some of its most liquid pairings over the past few months. However, some year-end stabilization behind this currency and broader risk sentiment, there was the possibility for reversals to establish themselves. Such potential has clearly been deferred with GBPJPY breaking to new lows and GBPUSD on the cusp of breaking a massive 23-year range low. Will these pairs trigger the next leg of a mature bear wave behind the sterling? Our DailyFX Analysts weigh in with their outlook and pick below. Chief Strategist - Antonio Sousa My picks: Short EUR/GBP Expertise: Economics and Behavioral Finance Average Time Frame of Trades: 1 month I have been short EUR/GBP for some time and I expect the Sterling to rise further against the euro. To some extent, I expect the euro zone economy to deteriorate significantly in 2009, which could lead to a significant shift of interest rate differentials in favor of the U.S. dollar and keep the EUR/GBP under pressure over the next few months. Also, it seems the European Central Bank continues to underestimate the size of the financial crisis by keeping interest rates too high for too long. Senior Currency Strategist - Jamie Saettele My picks: long GBPAUD at market, against 2.02, target 2.30 Expertise: Technical Average Time Frame of Trades: 1 month From the very beginning of the year, the GBPAUD has built a base from which to launch higher. The rally from 2.0225 (which is the lowest price seen since 1997) is promising structurally fro bulls (the advance is in 5 waves). The decline from 2.2322 may have just completed a 3 wave setback as well. A bullish bias is warranted and a break above 2.2322 is expected. Resistance is not until 2.3062. Open/Former trades: Long EURJPY: stopped out yesterday at 115 Long EURUSD: against 1.28, target near 1.47 Currency Strategist - Terri Belkas My picks: Long EUR/GBP Expertise: Fundamentals Combined With Technicals Average Time Frame of Trades: 1 day - 1 week EUR/GBP has run into resistance at the 61.8% fib of 0.9805-0.8838 and January 2 low of 0.9431/33, but with Friday's event risk having signficant bearish potential on the British pound, I think it may be worth sticking with long EUR/GBP positions (if you are already in), and short-term long positions are possible as well, though risk will need to be kept tight. Support comes into play at the confluence of the January 20 highs and a rising intraday trendline at 0.9322/30. Potential targets include the early January highs near 0.9630, as well as the record high of 0.9805. Currency Analyst - David Rodriguez My picks: Stay short the GBP/USD, tighten risk Expertise: System Trading Average Time Frame of Trades: 2-10 weeks Exactly one week ago I went short the GBP/USD on a break below noteworthy support, and needless to say the trade has done well. I have seen no real signs of potential reversal, and as such I'd like to remain in the trade. That said, there's no need to risk all of my profits on a reversal. I'd like to place max risk above the psychologically significant 1.4000 mark. A break above said level would tell me that price is likely to consolidate and correct through the near term, but my overall bias remains bearish the GBP/USD. Currency Analyst - Ilya Spivak My picks: Short GBPUSD (Pending) Expertise: Macro Fundamentals, Classic Technical Analysis Average Time Frame of Trades: 1 week - 6 months Yesterday I wrote that the British Pound has broken down out of a Falling Wedge formation that contained prices since late October to test multi-year triple bottom support in the 1.3680-1.4050 congestion area that has held up sterling since 1985. The pair has now put in a bullish hammer candlestick, hinting at the possibility of an upwsing. Look for a corrective rally to re-test support-turned-resistance at the falling wedge bottom (currently at 1.4250) and look for signs of a reversal to enter short, initially targeting the bottom of the price congesion area below 1.37. For detailed analysis of the other major currency pairs, please see my latest technical outlook report. Currency Analyst - John Rivera My picks:Short GBP/USD Expertise: Fundamentals Combined With Technicals Average Time Frame of Trades: 2-4 Days My long GBP/USD call last week hit my initial target of the 50-Day SMA at 1.4944 but banking troubles in the U.K. would send the Sterling in a free fall preventing further gains. Despite, the pair bouncing from support at the 1985 lows, 1.400 has proved as formidable resistance which leads me to believe that there is still more downside risks. Today’s dismal CBI industrial trends reading printing at a 28-year low underlines the trouble of the economy and with GDP and retail sales ahead and expected to show further weakness, the pound should remain under pressure. Currency Analyst - David Song My picks: Short GBP/CHF Expertise: Fundamentals and Technicals Average Time Frame of Trades: 2 - 10 Days After reaching a high of 1.8706 in December, the GBPCHF slipped to a low of 1.5124 on 12/29, and the lack of momentum to bounce back to the upside continues to favor a bearish forecast for the pair. As a result, I expect the pair to hold its bearish trend over the near-term as the Swiss franc continues to benefit from safe haven flows, and the British pound should continue to move lower against its currency counterparts as the advanced GDP reading for the U.K. is expected to show a 1.3% contraction in the fourth quarter. The Sterling is likely to face increased selling pressure over the next 24 hours of trading, and we may see the pair work its way towards the January low of 1.5364 over the stated timeframe. DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. 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