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The British Pound continued to decline against the US Dollar as expected, with sellers now testing critical support marked by a rising trend line set from mid-November. This barrier is reinforced by the 61.8% Fibonacci retracement at 1.6469, with a break downward initially exposing the 76.4% level at 1.6386. Alternatively, a turn above resistance at 1.6536 – the 50% Fib – targets the 38.2% retracement at 1.6604.
Risk/reward considerations argue against entering short with prices so close to support. On the other hand, taking up the long side looks premature absent a defined reversal signal. We will continue to stand aside until a more actionable setup emerges.
Daily Chart - Created Using FXCM Marketscope 2.0
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com