Here’s an update of the GBPUSD chart that I drew yesterday. As you can see, the Cable indeed saw some resistance at the 38.2% Fibonacci retracement level of the most recent down-wave. Interestingly, this level likewise corresponds perfectly with the psychological 145.00 mark which acted as a support at least two times in the recent past as well. Notice also that the pair broke down from a rising wedge formation which of course is a bearish pattern.
At present the pair is trading just above this week’s low at 1.42512. Given an oversold condition, it could move for awhile between this week’s low and 1.4500 before trekking south again. In any case, if and when the pair moves below 1.42512, it could easily fall towards 1.4000.
Fundamentally, the euro as well as the non-dollar currencies like the pound dipped again when Germany banned naked short selling and naked credit-default swaps. Naked short selling, in case, you do not know is the act of shorting a financial instrument without first borrowing it. Such action has a nasty effect of driving price lower at a faster pace. Credit default swaps, on the other hand, is basically like an insurance where a buyer makes periodic payments and receives a payoff in case the instrument defaults. Banning of these two sparked some speculation that the debt contagion in the euro zone will worsen.