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Talking Points
- A myriad of timing relationships converge next week in GBP/USD.
- Counter-trend move ahead?
Unfamiliar with Fibonacci Relationships? Learn more about them HERE
The 61.8% retracement in time of the July 2014 - April 2015 decline earlier this week failed to elicit much of a response from GBP/USD. The subsequent break of the 1x1 Gann angle line of the year’s low around 1.5170 keeps focus and attention lower in the pound, but at least some caution is advised heading into next week.
I say this because the first half of next week marks a convergence of several key geometric timing relationships including the 261.8% extension of the time between the April and June lows, the 161.8% retracement of the time between the April low and June high and the 61.8% extension of the time between the June and August highs. Conversely the potential time spiral gets even more interesting when you look at how the different swing points relate with each other looking backwards. For instance, early next week the August high will be at 38% of the time elapsed from the June high, while the April low will be at 61.8% of the time elapsed from the June high. Taking it a step further also yields some interesting results as last year’s closing high falls (+/- a day) falls at 161.8% of the time elapsed between early next week and the April low.
Does all this guarantee a reversal? No, but the possibility of one now goes up way up in my opinion. The big question for me is in which direction? Continued weakness into next week would favor an upside reversal with the 61.8% retracement of the April – June advance at 1.5085 and the median line of the June high near 1.5045 the initial levels of focus for me, but time is the more important element here. The curve ball would come from a move higher into the next week, but this wouldn’t be such a terrible thing as it would set up a potential opportunity to align with the broader trend. Initial levels of resistance on the upside are seen around 1.5270 and 1.5330.
--- Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com
To contact Kristian, e-mail instructor@dailyfx.com. Follow me on Twitter @KKerrFX
