GBP/USD (daily chart) as of October 22, 2012 has once again tentatively found some measure of support around the important 1.6000 figure after dropping to the current level from its highs around the 1.6150 resistance area late last week. The current return to 1.6000 support retests the bounce from this level that occurred just two weeks ago. This 1.6000 area not only represents a key psychological support level, but also the 38.2% Fibonacci retracement of the bullish trend from the August 1.5500 area low to the September 1.6300 area high. Furthermore, the 50-day moving average also currently resides around this area. With this strong confluence of support, if 1.6000 is able to hold, another bounce could push GBP/USD back up towards 1.6150, with a further potential reach towards the long-term highs around 1.6300. To the downside, if price cannot hold above 1.6000, a key potential support area on any further downside correction resides around the 1.5750 price region.
James Chen, CMT
Chief Technical Strategist
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