Forex Technical Update
The daily GBP/USD chart shows a market that is in the 9th straight bullish trading session, the current one breaking above a declining trendline going back to August 2011. The next resistance is seen at 1.5770, highs established Nov. and Dec., 2011. In the short-term however, the market seems to be respecting overbought conditions so let's take a look at the 1H chart to monitor this throwback.
Looking at the 1H chart, we see that the throwback will be testing the broken resistance as it goes to the 50% retraecment level at about 1.5630. For the market to confirm the breakout, the market should hold above 1.5607/1.56 (61.8%retracement). Meanwhile the RSI should hold above 40 to reflect maintenance of bullish momentum. If the market indeed holds above 1.56 and pushes back above 1.57, we are looking at 1.5770.
Otherwise, if the market falls below 1.56, and below the rising channel support, we have a more significant correction to the channel, not just the latest breakout swing. In this scenario, we look at the 4H chart to stalk this extended retracement toward first the 38.2% level near 1.5540. Then the 50% retracement level near 1.5483. For purpose of calculating reward to risk, we should probably look at 1.55 as a target if correction extends below 1.56.
Fan Yang CMT is the Chief Technical Strategist of IBTRADE and FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.