GBP was expected to ‘trade sideways’ yesterday but was incorrect as it plummeted to a low of 1.1622 during NY session. While the rapid drop appears to be overdone, the weakness in GBP has not stabilized. In other words, GBP could weaken further but the chance for a break of 1.1610 is not high for now. The next support at 1.1580 is not expected to come under threat. Resistance is at 1.1688 but only a breach of 1.1715 would indicate that the weakness in GBP has stabilized.

On Monday (29 Aug, spot at 1.1690), we noted that downward momentum has improved quickly and we held the view GBP could weaken towards 1.1630. Yesterday (30 Aug), GBP dropped to a low of 1.1622. Downward momentum has improved further, albeit not by much and the risk for GBP is still on the downside. The next level to watch is at 1.1580. On the upside, a break of 1.1755 (‘strong resistance’ level was at 1.1800 yesterday) would indicate that GBP is unlikely to weaken further.

The formation of a Falling Channel chart pattern on an hourly scale is indicating more downside ahead. The upper portion of the above-mentioned chart pattern is placed from August 11 high at 1.2249 while the lower portion is plotted from August 5 low at 1.2003.

GBPUSD correction before Downside Continuation

Aug 31 2022

Stop Loss -0.56%

Holding time 3hr

1.16810

Entry price

1.16160

Stop loss price