The US Dollar strengthened late last week, especially against much a weaker British Pound, which ended Friday on a weak 1.9430. The Pound earlier in the week again failed to get anywhere near breaching the previous high of 1.9890.

British Pound (GPB/USD) Targeting a Significant Downtrend to 1.8600

Technical Analysis

Price Pattern - The Pound broke below the Symmetrical triangle off of the 1.9890 high late Friday. This initially targets a move equivalent to the size of the pattern or 5cents.
Support - Heavy support is at the 192.60 lows, should this break then the next significant support coincides with the lows of 1.8515 and 1.8600
Trendline's-The Pound managed to hold the uptrendline support on Friday at 194.30, virtually at the trendline level, should this trendline break then that would confirm the bearish pattern
% Levels - The 50% support level of the rally from 1.7250 lies at 1.8550, this conveniently coincides with major support levels along previous lows.
Elliott Waves - The Elliott wave count implies an immediate 5th wave peak, and thus implies a correction of the rally from 172.50, which confirms the trends analysis.
Time - The Pound is correcting an up move spanning some 10 months, therefore the Pound could correct / drift lower for as much as three months or into May 2007.

Conclusion - The GBP is targeting a significant downtrend to 1.8600 by early May 07. The key trigger levels for this trend are a break of 1.9400 and 1.9250. Once confirmed, the downtrend is expected to be a correction to the uptrend from 1.7250, and therefore does not imply an end of the bull market.. Current Resistance lies at the previous high of 1.9661.

By Nadeem Walayat
Editor, The Market Oracle
(c) Marketoracle.co.uk 2006-07. All rights reserved.

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