GBPUSD: Hesitation To Price Digestion

GBPUSD- Weakness in early trading today following the pair's marginal close on Friday remains suggestive of price exhaustion after GBP's run off the 1.5706 level to a high of 1.6399 the past week. However, the nearer term price run to the upside remains valid while its Sept 30'09 high at 1.6124 remains unbroken suggesting a move higher towards its strong resistance located at the 1.6468/66 area(its Sept 23'09 high/SH falling trendline) should follow on ending its immediate weakness. That zone is very significant as a confluence of resistance levels are seen there which could either turns the pair back or gives in for a push higher towards the 1.6740 level, its Sept 11'09 high with an eventual loss of  there setting the stage for a retarget of  its YTD high at 1.7041. Above the later will trigger the resumption of the pair's medium term uptrend now on hold. On the other hand, on any pullback from its current price level, its psycho level at1.6200 should come in as the initial support ahead of the 1.6124 level where a reversal of roles is expected. Further down, its psycho level at 1.6000 will be targeted as the next support before its Oct 13'09 low at 1.5708 and then the 1.5500 level, its psycho level. On the whole, although we still retain our short term weakness view off the 1.7041 level, that decline is now being challenged by nearer term recovery. Our ST view will be voided if the 1.6466/68 zone gives way.

Daily Chart: GBPUSD