The pair has fallen as suggested in the last analysis we did on it. We mentioned there was very stiff resistance in the 1.33 region but with the possibility that it wouldn’t reach that level as it was more likely to break below 1.2955, the July low, first, because of the strong momentum behind the price action. Indeed, it has now gone through that support and headed slowly towards 1.29.
1.28 a real possibility
This daily chart shows that we could be headed for 1.2780 to 1.28, as that marks the 61.8% retracement of Brexit low to post-Brexit highs. The actual low on the fibonacci retracement indicator might be slightly higher at 1.1841 (per several sources). The precise low that resulted from the flash crash in October 2016 is debatable and thus fib levels might not be fully accurate here. The fib levels stemming from a flash crash are given lower significance than levels derived from regular price action, espeicllay since the crash may have bene a result of a mistake.
Even so, the 1.28 to 1.2850 zone has provided support numerous times in the past. Prior to that, it offered resistance which then turned into support.
We we are also in a downward channel, seen here on the 4-hour chart below, and the bottom of the channel corresponds with roughly the aforementioned 61.8% retracement level, or between 1.28 and 1.2850. However, 1.29 is bit of a psychological hurdle to get over first. 1.29 could act either way. It could provide bit of support or give way easily. But 1.2850 has offered strong support in the past. We expect 1.2780-1.28 to 1.2850 to offer much stronger support should the price get there.
We expect 1.29 to give way. So be on the look out for how the price action develops in the 1.2780-1.28 to 1.2850 zone. There are clusters of support with good deal of confluence here. This area could well provide some relief from the downward price pressure that has engulfed this pair over the last two to three months.