Forex Technical Update

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GBP/USD
GBP/USd 7/29/2011 1H chart
Technical Setup and Fundamental Trigger:
- Ahead of today's US GDP data, the GBP/USD almost completed an AB=CD pattern. Almost, in that there was not exact wave equality, but the second downswing was cut short as it tested the 200SMA in the 1H chart.
- This was a technical setup for a bullish attempt.
- The 2Q GDP release for the US came out lower than expected at 1.3% (forecast: 1.7%), and the previous quarters data was revised down heavily from 1.8% to 0.4%.
- The GBP/USD accelerated its bullish attempt after this release.
Bullish Scenario:
- It is now taking out yesterday's high, and confirming a recent upside breakout.
- The market is likely to continue the bullish trend started by a leading traingle seen in the 4H chart which broke above an important declining resistance.
- Note that in the 4H chart, the RSI remains above 40 after the most recent bearish attempts.
- Now, the market is likely going back to 1.6440 to retest this week's high ahead of the Tuesday deadline for the US debt ceiling vote.
- If the GBP/USD continues above 1.6440 after the risk event, 1.6546 and 1.6745 highs (seen in the daily chart) are the next targets.
- Failure to reach 1.6546 and a strong bearish attempt that breaks back below 1.6440 would reflect a market that is still ranging in the medium term, and can slide back towards the 1.6250 level in the short-term.
GBP/USd 7/29/2011 4H cHart

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Fan Yang CMT
Chief Technical Strategist
FXTimes