The GBP/USD has just reversed at a key level. The last wave up looks fractal and may very well be an ending diagonal.

A strong pull-back will ensue if this is the case.

Both pairs are threatening to break-out.

Special attention is warranted throughout the Asian and London sessions. A break here would point to values that we haven’t seen in weeks maybe even months.

http://www.fxstreet.com/technical/analysis-reports/fx-weekly-report/2009-01-26.html

Well nobody know this for sure, however the very fact that we have come to visit it for tea so to speak, suggest it may fall some time this year if not very soon.

In the meantime what about the short and medium term? will it hold up over the next few days to cause a reversal? At this time it is holding however the retreat from the price point is dull and lack-lustre. So until we move away another few hundred pips I would be cautious.

However, one thing is clear; we are very oversold on the GBP/USD and overdue for a correction. If we breach below the current low of 1.3620 I would expect a fairly dramatic move and then a very sudden and strong reversal.

The level is very significant and will act as support, resistance and even as a sort of magnet drawing the price back to  that level over the next year or so.

Let’s take a look at the USD/CAD when it reached its ten year price around 1.00 USD. It blew through the 1.00 level on the first visit but quickly reversed and spent 9 months straddling the line before finally breaking back out.

So what will happen to the GBP/USD at it’s ten year level?

Here’s a view of the USD/CAD from last year.

Here we are again at an important price pivot point.

On my last post, I pointed out that there appeared to be repeating patterns on the EUR/USD. Very shortly after,  the pair rallied 250 pips.

We are now at an important price juncture and need to be attentive as the next volatile move should provide direction.

Could the pattern repeat one more time? Or will the break-out continue? It’s a bit like a drama!

I was teaching a live course a few months ago and in the class were two equities traders that use fractals in trading (Fibonacci).

They look for patterns that are repeating and use this as a guideline. The also look for patterns that repeat and become smaller and smaller to anticipate a break-out.

Here are some repeating patterns on the EUR/USD - We will have to observe to see what happens next.

With the new low, the descending trend is still intact. Where will it end?

The EUR/USD retraced most of its Thursday/Friday gains. We are now sitting on the .618 re-tracement of the previous move. In this range between .618 and .764 is where the trend is most often established.

Watch this level for trend direction.

Please observe the previous post and graphic. We have now broken the Red trend line. This may represent the beginning of an up-trend.

What I will be watching for now is a potential turn here or re-tracement towards the low of 1.3025 without making a new low and then looking for a new high above 1.3425.

1.3425 is very important as it represents the previous level of congestion.