Fundamentally, I believe the U.K. will crash out hard from the EU causing GBP/USD to fall to parity. Coupled with weak GDP and rising levels of inflation, the economy is headed towards a recession in the coming year. Analysis was done based off a Fibonacci Retracement level from monthly swings to the downside. A further extension level was plotted, and with confluence of Elliot Wave principals, the 3rd leg of the impulse wave will reach at least 0.93$ levels.
There is another problem though - that the US-Dollar may also crash hard based on a lot of economic data relevant to the monthly time frame. GBPUSD is a ratio of the base of GBP vs the quote of US-Dollar. So if the $ heads south with greater force or acceleration than GBP, then the exchange rate could flatten or rise. It all 'depends'.
Lynx4x
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@Captain_Walker, Absolutely. But also note, fundamentally, on a yearly scale, the FED recognizes that the U.S. economy is growing strongly, with another two FED hikes expected for 2019. Fundamentally, the U.S. will remain strong, and also note that when investors and speculators are highly risk-averse, they tend towards 'risk-haven' assets, which will naturally appreciate the U.S.Dollar.
Again, it all depends. Let's see how it plays out I guess!
Happy New Year!
Lynx4x
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@Lynx4x, Where I said 'risk-haven' I meant 'save-haven' haha. My mistake
Captain_Walker
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@Lynx4x, I thought that you mean 'safe-haven'. The main point is that US-Dollar has not rolled over as yet, as a 'safe-haven' currency. GBP ain't no 'safe-haven' currency, especially with Brexit about to happen. So - if stock markets meltdown leading in probability to 'safe-haven' appreciation of US-Dollar, then GBP will need to fall pretty hard to take the GBPUSD ratio a significant distance south.
The FED could well re-consider their 'expected' rate hikes and do nothing in the first half of 2019. They'd be balancing probability of catastrophic meltdown, and having to support the PPT - against the other probability of slower meltdown by notching up interest rates at a slower rate. There's a lot of noise in the 'equation'.
Lynx4x
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@Captain_Walker, Stock market meltdown != economic meltdown. The FED doesn't care about the stock market, they have two objectives: monetary (control inflation) and financial (stop banks running out of liquidity) stability.
For sure, they may not do anything in the first half of 2019. We will start seeing the effects of the Interest Rate hikes from 2018 take effect, but that doesn't negate the fact that the US.Dollar is fundamentally in a better position than Sterling.