GBP/USD tanks below 1.25 and technical targets point to a bigger move

• GBP/USD has fallen nearly 1% on Friday as risk sentiment turns sour.
• There is a big confluence level lower on the chart close to 1.2350.

GBP/USD 1-hour chart

As the global risk sentiment turns south again so does cable. The currency pair is now lower by 173 pips from its highest point on Friday. Looking at the chart now and Dow theorists will not that a lower high lower low pattern has been created. Although this is only the 1-hour chart it could be enough to point to a major trend change in the longer term. 

The lower high lower low pattern lets us work out some Fibonacci projections by examining the waves. The 261.8% extension is pretty close to the 61.8% retracement and a trendline. This makes the zone a magnet level and if the downtrend continues this could be an area where the price might find some support.

Due to the extreme nature of the price move the MACD and Relative Strength Index indicator are both confirming the move. But if there is to be a replacement the previous wave low of 1.2544 would prove to be a good resistance point for the bears to re-enter on the short side.

Additional levels