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GBP/USD 4H Chart 9/26 2012 7:35AM EDT

GBP/USD 9/26/2012 4H chart

ABC Correction: The GBP/USD continues to retreat after barely making a new 2012-high at 1.6309 last Friday (9/21; old high was 1.63). So far the bullish momentum from the rally since July has not been broken since the 4H RSI reading is still sitting above 40, but it is at the cusp of being broken. The retreat from 1.6309 has so far developed in 3 waves, and can be called an ABC correction.Wave C will achieve wave equality with A at 1.6141, as indicted by the fibonacci expansion tool in the 4H chart.

When you look at further fibonacci expansion targets, you see that an aggressive 161.8% expansion projects to 1.6063. It should be noted that 1.6065 is a previous pivot, and price is likely to meet a rising trendline (channel support) around this level. Therefore, further expansion of wave C in this ABC correction has limited outlook to the 1.6060-1.6070 area.

Note that the channels support isn’t even the key trendline, as it represents only price action since mid August. The rising trendline from July is way lower, under the 200-day SMA and some resistance pivots around 1.5775.

GBP/USD Daily Chart 9/26/2012 7:55AM EDT

GBP/USD 9/26/2012 Daily chart

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

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