Forex Technical Update

Previous: GBP/USD Maintains Bearish Momentum (10/8)

GBP/USD 4H Chart 7:53AM 10/12/2012

GBP/USD 10/12/2012 4H chart

Rounded bottom: The GBP/USD has been choppily bearish since 1.6309, accelerating since Friday last week (10/5), and finding support at 1.5970 this Tuesday (10/9). Since then, cable has been building a rounded bottom seen in the 4H chart.

Bearish momentum: The RSI is about to test 60. If it is held under 60, the market still has bearish bias, but a break above 60, reflects intent of the market to extend a rally from the rounded bottom. There is a pivot around 1.6170 area. We should also treat the declining trendline as resistance.

This bullish outlook has a stronger case if the market shows more respect to the rounded bottom by supporting any subsequent throwbacks above 1.6040.

However falling below 1.6040 and below a near-term rising support, especially if the RSI holds mainly under 60 (given some elbow space), then the market has more to go before it can form a bottom. Instead the focus will be back to the downside with room toward 1.5913 pivot and then the 200-day SMA and a rising trendline closer to the 1.58 handle at this point.

GBP/USD Daily Chart 7:55AM 10/8/2012

GBP/USD 10/12/2012 4H chart

Fan Yang CMT is the Chief Technical Strategist, trader, educator and a of the main contributors to FXTimes – provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.

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