When Will GBP-crosses Find Support? - EUR/GBP, GBP/JPY, GBP/USD
- GBPUSD hovers above range support near 1.5860.
The British Pound has been one of the worst performers since mid-July. Is the selling ready to abate or is further weakness due? Depends on where you look. In recent days, several major crosses have come into support: GBPUSD ahead of $1.5860, former range support from this time last year; and GBPJPY above ¥169.40/45, triangle support from the September 9, 2013, February 4, 2014, and September 8, 2014 lows.
In the event of more British Pound weakness, GBPJPY and GBPUSD may be the best bets. After all, the FX market has recently shifted into a classic 'risk off' mindset, thereby boosting the appeal of the funding currencies. These two pairs represent the strongest GBP trends, but in the cast of GBPUSD, one must be mindful of the stretched USD long positioning.
The two more bullish looking GBP-crosses take different forms. EURGBP, for example, has been mired in a year-long downtrend. Its recent rally off of channel support now has the pair on route to former swing highs and channel resistance, which coincide at £0.8035. We may be in the midst of a countertrend rally with an opportunity to sell shortly.
In GBPAUD, this pair has already broken its 2014 downtrend and has spent the past two weeks carving out a flag/triangle above its August swing highs at A$1.8190. This is a longer-term picture: we're looking for a monthly close above A$1.8400 to establish longs.
See the above video for more detailed technical outlooks for EURGBP, GBPAUD, GBPJPY, and GBPUSD.
--- Written by Christopher Vecchio, Currency Strategist
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