October 21, 2008
GBP/USD Back Below 1.70 - How Much Further Could It Fall?
As I write this latest blog post the GBP/USD is currently around 1.6730 having dropped sharply below 1.70 in today's trading session. I said it might fall to 1.70 a few months ago, and mentioned 1.60 as a possibility and now it looks like it could become a reality.
If you look at the monthly chart you will see that the price has now fallen below it's EMA (200) which on a monthly chart is a very telling sign because it has been above this crucial indicator since 2003.
In fact there are signs that the GBP/USD could be in for a substantial fall in the coming months. If you look at an even longer term quarterly chart, you will see that the Supertrend has just been broken this quarter. So if it closes out the quarter below the Supertrend level of around 1.7220, then this confirms the change in trend and opens up the possibility of a substantial fall to 1.50 or maybe even 1.40.
Of course it could easily rebound from these low levels but if I was a betting man I would say the GBP/USD is far more likely to fall even further from here than bounce back upwards.