After announcement of results of referendum in 2016, in which the British voted 51.87% to leave the EU, market have beaten very important support at 1.3850 level. As a result of subsequent falls, the price of Cable was at its lowest level since May 1985.
Looking purely technically on the current market situation, the 1.3850 level could be defined as the neck line of head and shoulders formation. Taking into account the range measured from head to neck, we come to the conclusion that potential drops could reach even around 0.6200.
However, taking into account the fact that, according to the polarity principle, any level that has been supported in the past should be tested as a resistance after being defeated, we should expect an uptrend to the already mentioned 1.3850 level, which coincides with a 38.2% Fibonacci correction.
Looking at weekly chart, we see that the resistance also coincides precisely with 61.8% correction of Fibonacci retracement from the last downtrend pulse.
On the daily chart it is worth noting that even if the potential gains reach the previously mentioned 1.3850 level, first supply response can be expected earlier around 1.3450 level.
However, it should be noted that since last Wednesday the market is moving in consolidation. Taking into account that today we have rejected its upper limit, at least in the near future we would expect deepening of current correction. Potential drops could reach around 1.3060, converging with the upward trend line. Rejection of this zone could be a signal to continue growth.