(Chart courtesy of FX Solutions' FX AccuCharts. Price on 1st pane, Slow Stochastics on 2nd pane; horizontal support/resistance level in yellow; downtrend lines in red; chart patterns in magenta; 50-period simple moving average in light blue.)

1/26/2009 – GBP/USD – On the first day of the week after hitting a fresh 23-year low, price action on the GBP/USD (a daily chart of which is shown) has rebounded cleanly off the 1.3500 extreme low. This rebound could possibly extend into a pullback move towards the bottom border of the large wedge consolidation that price broke in the beginning of last week. Currently, the level of this wedge bottom is around the 1.4200 region, which now represents substantial near-term resistance to the upside (support becomes resistance). Oscillators like the displayed Stochastics are indicating exhaustion and supporting the current price turn, as they are turning up from oversold. To the downside, the extreme low around 1.3500 serves as exceptionally strong support, as it represents a price that the pair has not visited for over two decades. Therefore, any strong breakdown below this level could carry the strong bearish momentum to target further support in the 1.3000 region.

James Chen
Chief Technical Strategist
FX Solutions

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