Forex Technical Update
- Rejection of Bearish Attempt:
- The GBP/USD saw a bearish push to 1.6207 before the market pushed up the pair back above a rising support seen in the 4H chart. This support connects the July 12 low of 1.5780 and August 11 low of 1.6110.
- The respect of this support despite cracking it shows bulls are still in control.
- Note that this stretched a 61.8% retracement to 78.6% retracement. It also crack the 200SMA, but the sharp rejection that lead to a rebound can be interpreted as essentially respect of the moving average or mean price actionas support.
- Resistance Above:
- This does not necessarily mean we are in a bullish continuation. Many such attempts are bull traps for further consolidation.
- The immediate resistance that will test whether the market is in a bullish continuation or just a bullish leg of a consolidation is the 1.6450 pivot.
- It acted as resistance and support before and is still fresh in the market's price memory.
- The resistance zone may span to 1.6500.
- If the market respects the 1.6450-1.65 resistance zone, it may be going for another attempt at to crack the 1.63 support. Seeing rising lows however, it may be prudent to be conservative on a bearish outlook to be contained above 1.6350.
- Bullish Continuation:
- Above 1.65 we are very likely to be in a bullish continuation. We may also want the RSI in the 4H chart to clear back above 60 and preferably kiss 70. Sometimes waiting for it to cross back above 70 means we will miss strong price action as well, so it's a trade off you have to decide on (wait for confirmation and miss bulk of price action, or get in sooner with fewer confirmation but more upside and less downside.
- In any case true confirmation is the RSI breaking 70, and price action breaking above 1.6530, a previous high.
- Looking at the daily chart, a break above 1.6530 opens up the 1.6618 high, and then the 1.6745 high.
Fan Yang CMT
Chief Technical Strategist