GBPUSD Outlook, Monday, August 18, 2008

The GBPUSD remains in a very strong impulsive move to the downside with potential for much lower prices in the months ahead. However, there are events which must unfold before further extension to the downside to multi-year lows is confirmed. And should this confirm, then the move lower will be an explosive move as supported by high volume and significant momentum. Below we have broken our analysis into short term, medium term and broad term outlook.

Short term

The intra-day move lower from Thursday’s 1.8786 high is complete at Friday’s 1.8512 low, as the pair currently remains within the previously sited 1.8617-1.8681 intra-day consolidation zone. A sustained break of this zone will see continuation in the direction of the break with 1.8712 as the next upside target, while to the downside, a sustained open and close below 1.8581 will confirm prices are once again moving lower with 1.8512 and beyond as the objective..

In that the intra-day move from 1.8786 is merely one of several sub waves of a much larger extension to the downside beginning with the March 9, 2008 high at 2.0397, the next wave from the 1.9034 high will be complete at 1.8512 only if prices open and close on a hourly basis above 1.8712, otherwise, the move lower from 1.9034 remains active. A sustained break of 1.8712 will see prices move into a broader consolidation phase within a 1.8712-1.8835 zone and confirm the fall from 1.9034 is complete at 1.8512.

Medium-term

As to the medium term trend from the March 9, 2008 high at 2.0397 remains active as ONLY a daily open and close above 1.9232 will complete this fall with the August 15, 2008 low at 1.8512, as prices will then consolidate within a 1.9232-1.9677 zone before attempting another 5th wave move lower targeting 1.8512 and beyond.

Broad outlook

It is with the broad outlook that risk for a dramatic decline in the GBPUSD remains, as a monthly open and close below 1.8619 suggest GBPUSD will continue to move much lower in the months ahead with 1.7048 as the objective, however, it is likely that prices will consolidate within a 1.8619-1.9589 zone before further potential decline will occur. So, while prices remain below 1.9589, risk for an extension to the downside remains as such a move has potential to equal that which occurred 1992-1993. Again, this is not confirmed as there are several events which must also unfold within the short term and medium term trends before the broad trend lower is confirmed. As to the upside, a monthly open and close above 2.0132 will eliminate any downside risk as prices will once again look to target the November 1, 2007 high at 2.1160 and beyond.

Summary: The medium trend is most crucial at this juncture, as the fall from the March 9 high at 2.0397 remains active as risk for further move lower will continue until prices can close above 1.9234 while 1.8512 holds.

Forex Signals Plus Alerts, RW