Long Term View Analysis on GBP/USD

This GBP/USD monthly chart displays our long term view of the pair, with cycles and classical chart analysis both visible. As in our EUR/USD long term cycle analysis, we can clearly see two approximate cycles; the first being a four year series separating the major lows and the second being sixteen years, which separates the important lows of 1985 and 2001.

The four and eight year cycles follow the predicted path and give a clear indication for the next major low set for the end of 2009 and the first months of 2010.

We see the 2007 highs as a ceiling which will not be surpassed for some time. Combining the technical picture with cyclical analysis, we can see prices are approaching the trend-line formed by the 2002 and 2006 lows. Any downward move should be limited to this trend-line, which means any extended move to the 1.9100 area, or possibly a tiny amount lower, will give a good buying opportunity in the medium term. From these levels and from the base of 1.9300-9400, we see the pound appreciate versus the dollar, reaching the levels of 2.0100 or 2.0350-400 but not any higher. The second half of 2009 should see the GBP/USD fall sharply, breaking the 1.9000 level and even targeting 1.7000 - which is very strong long term support!

If this support is tested along the timeline as the cycles imply, it will be followed by an upward move which could lead to the area of 1.9000-9300, creating a large H&S formation -the first leg of the right shoulder. From 1.9000-9300 the levels of 1.7000 will be tested again.

FX Greece

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