The quid is in trouble once again
For me, the 61.8 fib level is the most important one. The 38.2 fib is the one that trend traders may add against, between the 50.0 and the 61.8 is where both side do battle to keep or break the trend and the 61.8 as where that particular trend is confirmed as being broken and the towel gets thrown in by those who rode the trend from the start, and those that were in late and now offside.
Cable has broken it's 61.8 fib of the Jan swing up.
GBPUSD daily chart
That's now opened the door for a steeper retracement down to where this move first started. At the least, we could see this run hit the low 1.21's. At the worst, we see the entire move wiped out, and then we'll have further questions to ask.
1.20 is going to be a big psychological level so that's where I'm expecting the strongest support to sit. There's going to be plenty of minor levels in the way, and if we do head lower, it's not going to be a straight line. You only need to read Mike's latest post on order boards to know what else can limit moves in currencies outside of the tech.
As we know with trading, nothing is definite. Just because we've broken some tech levels doesn't mean we'll keep moving lower. All we can do is use what we've seen and what we know to figure out where the risk areas now lie. The first one is at the break area of 1.2250/60. If the price stays below, as it is doing now, the chances are higher that the move continues. Move back above and that pressure is eased. At every stage we can assess what's happening and ask simple questions about the moves that will confirm which way the price wants to go.
Remember that context is important too. This fib is measuring a two month move. No one should be looking for a thousand pip move just because it's broken. The time frame of the tech is just as important as the tech itself. If this was a 5 year fib then we can talk about huge possibilities. If this was a 5 minute fib we'd be talking about single or at most double digit pip moves.
Right now we have two or three main areas to watch. 1.2210/15 protecting 1.2200 below, and 1.2250/60 above. A challenge of either will confirm direction.