GBP/USD Monthly Technical Analysis for December 2015

The GBP/USD posted another lower-low during November, leading to a continuation of the downtrend. The Forex pair finished down 0.0370, or 2.40% at 1.5056. The catalyst behind the selling pressure was the divergence between the Bank of England and U.S. Federal Reserve monetary policies. The Bank of England suggested that interest rates were not likely to rise until late 2016 or early 2017 while the Fed is widely expected to begin raising interest rates this month.

Technically, the main trend is down according to the monthly swing chart. The main range is 1.4565 to 1.5929. Its retracement zone is 1.5247 to 1.5086. Not only is the swing chart indicating a downtrend, but the market also closed below a key downtrending angle and the retracement zone, indicating that further selling pressure is likely.

Based on the close at 1.5056, the direction of the market this month is likely to be determined by trader reaction to the downtrending angle at 1.4969.

A sustained move under 1.4969 will indicate the presence of sellers. This could trigger an acceleration into the next potential support angle at 1.4885. Taking out this angle could lead to a test of 1.4725. This is the last potential support angle before the 1.4565 main bottom.

A sustained move over 1.4969 will indicate the presence of buyers. The first important upside target is the Fibonacci level at 1.5086. The daily chart indicates there is room to the upside with the next targets coming in at 1.5205 and 1.5247.

The 50% level at 1.5247 is also a trigger point for a steep upside move with 1.5449 the next major target.

Watch the price action and read the order flow at 1.4969 this month. Trader reaction to this angle will tell us whether the bulls or the bears are in control. Look for volatility on December 16 with the release of the Fed’s monetary policy statement. Traders expect the Fed to announce a 25 basis point rate hike. This has already been priced into the market. Look for a huge short-covering rally if the Fed does not raise rates.