The GBP/USD was bearish after the Non-Farm Payroll release on Friday, and after a retracement to near 1.5830, the market continued lower, finding support just ahead of the 2/6 US session at 1.5730. Note that this swing confirms a bearish breakout of a rising channel support, AND the 1H RSI reading has tagged 30, showing some bearish momentum in the short-term.
However, it should also be noted that the market is still trading above the 200 Hour Simple Moving Average, which was actually just tested as support and respected. Also, this is coming after an ABC corrective structure, so a bullishcontinuation can be imminent. This bullish continuation scenario requires a break back above 1.58 area, (61.8% retracement of 1.5860-1.5730 is at 1.5810). Inability to do so would be clues to a bearish market. The bullish market has 1.59then 1.61 as targets/resistance levels.
If instead of climbing above 1.58, the market continues below 1.5730, the market will be telling us that it wants to follow through with the bearish breakout of the channel support. In the 4H chart we see some retracement levels and pivots.1.5636 (38.2% retracement) -1.5660 (pivot going back to Dec. 2011) is the first area of support below 1.5730. Then 50% retracement and 200 4H SMA concide near 1.5560. below that a pivot is just under 1.55, and 61.8% retracement is at 1.5485.
Fan Yang CMT is the Chief Technical Strategist for IBTRADE, trader, education, and a main contributor for FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
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