(Chart courtesy of FX Solutions' FX AccuCharts. Price on 1st pane, Slow Stochastics on 2nd pane; uptrend lines in green; downtrend lines in red; chart patterns in yellow; Fibonacci retracement levels in grey; 50-period simple moving average in light blue.)
4/08/2008 GBP/USD Price action on the GBP/USD daily chart, as shown, has just tentatively poked down below a descending triangle. This triangle is outlined on the chart in dotted yellow. Like all triangles, this one represents a price consolidation with progressively diminishing volatility until a break in either direction occurs. Though it is not a rule, this break is most often in the direction of the prevailing trend. In the case of this current Cable daily chart, this tentative break, if there is indeed continued follow-through to the downside, can certainly be seen as moving in the direction of the medium-term downtrend. The bottom line of the triangle has additional significance in that it represents a long-term, oft-visited horizontal support/resistance level, and it also coincides approximately with a key 38.2% Fibonacci retracement level (the low-to-high retracement span being measured from the double-bottom swing low on 2/20/2008 to the top of the triangle on 3/14/2008). In the event of additional downside follow-through on the triangle break, major support resides in the region of the previous double-bottom low (short yellow line) around 1.9350. A breakdown of this further support level will also confirm a major pullback-continuation down.
Chief Technical Analyst
IMPORTANT NOTICE: These comments are for information purposes only. The information contained on this document does not constitute a solicitation to buy or sell by FX Solutions, LLC., and/or its affiliates, and is not to be available to individuals in a jurisdiction where such availability would be contrary to local regulation or law. Opinions, market data, and recommendations are subject to change at any time. Forex trading involves substantial risk of loss and is not suitable for all investors.