Forex Technical Update

Previous: GBP/USD in a Double Top; 1.5740-1.5750 is Key Support (3/21)



The GBP/USD pushed higher over the 3/27 Asian session, but stalled at 1.60 as the European session began. Looking at the 4H chart, the pair looks like it is in a terminal wave, a 5th wave of a 5-wave structure. Also, we see the that this 1.60 area was a previous resistance  that caused a bear run that started on Feb. 29. As the market tests this level again, the 4H RSI reading shows bearish divergence, though it has also shown persistent bullish momentum as it tagged 70, failed to break below 40, and returned above 60 again. Therefore, a bearish outlook from this resistance should probably be in the context of correction against a bullish motive wave.

In other words, the current bearish outlook has a larger scale bullish outlook to follow. We do have a large bearish candle developing in the 4H chart. Let's take a look at the 1H chart to see if the market can top off here at under 1.60. The 1H chart shows a bearish divergence with the RSI as well. There is a near-term support pivot at about 1.5945. A break below 1.5940 and then failure to break back above 1.5960 should be a good sign for the short-term bearish outlook.

The targets going down should probably be first the 1.59 handle, then 1.5850, 38.2% retracement of the 1.5605 to 1.60 swing. There can be further downside to a rising trendline seen int he 4H chart, which is probably at the 1.58 handle, where you also have 50% retracement and the 200SMA in the 4H time-frame.

Remember that this bearish outlook is going against some recent bullish momentum, and therefore should be limited to only the short-term like just in the US session or at most include just the next Asian-European session. After the correction, we have upside risk toward 1.61, 1.6150, Key resistance and highs from Nov. 2011. A break below 1.5750 would be reason to shelve this subsequent bullish outlook.


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Fan Yang CMT is a forex trader, analyst, educator nd main contributor 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 and IBTrade 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.