Forex Technical Update

Previous: GBP/USD Rallies Sharply to Range Resistance (7/26)

GBP/USD 4H Chart 7/31/2012 7:20AM EDT

GBP/USD 7/31/2012 1H chart

The GBP/USD has been in a near-term consolidation since rallying from the 1.5480 to 1.5767 last week. So far this week, it is starting to form a head and shoulder's pattern as seen in the 1H chart.

Note the wave count as well, because last week's rally action was a bullish motive wave. In this wave count scenario, so far this week, we would have completed a, b, and would be developing wave c. The neckline is at 1.5665 and a push below that targets 1.5630-1.5635 area as a swing projection.

A slightly more aggressive projection in the near-term would be the 1.56 psychological handle to 1.5615 near 50% retracement and the 200-hour simple moving average.

The 4H chart shows that the market is forming this head and shoulders pattern at a range high around 1.5770. Here the middle of the range is around 1.56 (maybe a tad lower), while the bottom of the range is from 1.5460 to 1.5494/1.55 area. A conservative target in consideration of the previous uptrend, is the 200 simple moving average, which is around 1.56 here, near the middle of the range.

GBP/USD 7/31/2012 4H Chart 7/22/2012 AM EDT

GBP/USD 7/31/2012 4H chart

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

Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analysis.