GBPCAD is nearly 2,000 pips into its southbound journey that began when the weekly head and shoulders pattern confirmed in late June. The flash crash in the pound earlier this month only exacerbated the downward spiral putting the pair below a critical level that dates back to 2009.
The weekly chart below illustrates how the 1.6207 handle capped three advances in 2012 and 2013 before flipping to support later that year.
If you scroll back even further, you can see that this area also represents the 2009 low.
With the pair firmly below this area, we can begin watching for bearish price action on a retest of 1.6207 as new resistance.
However, given that prices remain somewhat overextended due to the October 7th crash in the pound, there is a decent chance of a more substantial relief rally toward the August low at 1.6606.
Either way, I’ll be on the lookout for favorable selling opportunities so long as prices remain below the 1.6606 handle on a daily closing basis.
For those who feel that the pair has run its course and thus downside movement may be limited, keep in mind that price is still 900 pips from the measured objective at 1.5250 per the seventeen-month head and shoulders pattern that I mentioned on June 1st.
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