(Chart courtesy of FX Solutions' FX AccuCharts. Price on 1st pane, Slow Stochastics on 2nd pane; horizontal support/resistance levels in yellow; uptrend lines in green; downtrend lines in red; 50-period simple moving average in light blue.)
10/21/2009 - GBP/USD - Price action on GBP/USD, a daily chart of which is shown, has just made a clean breakout above a long-term downtrend resistance line extending from the July 2008 high. This breakout is a significant first step in possibly breaking out of the prolonged consolidation that has characterized this currency pair since June of this year. Whereas other major dollar-based pairs are currently entrenched within very clear and strong medium-term trends (uptrend on EUR/USD, downtrend on USD/JPY, downtrend on USD/CHF, downtrend on USD/CAD, and uptrend on AUD/USD), the overall trend on GBP/USD is presently unclear. If the current bullishness in the pair continues, GBP/USD should join the other pairs in the general trend of dollar-weakening. A major near-term upside target resides in the 1.6740 price region, which is the approximate shoulder top of the current consolidation. A breakout above that level would confirm a medium-term uptrend continuation, and should target further resistance around the top of the failed head & shoulders, around 1.7040. Strong downside support currently continues to reside in the 1.6100 price region.
James Chen, CMT
Chief Technical Strategist
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