GBP/USD 1H Chart 9/27/ 2012 8:15AM EDT
After ABC correction: The GBP/USD indeed rallied following the completion of an ABC correction, with pretty much wave A=C wave equality, as seen in the 1H chart. There was even a bullish divergence with the 1H RSI before the rally that is now pushing above 1.62 as we enter the 9/27 US session. The 1H chart shows the GBP/USD at a key juncture from which we can get clues for its direction in the short-term.
Bearish scenario: As you can see the 1.6220-1.6225 area consists of the 200-hour SMA and a short-term declining trendline from last week. Also note the RSI reading at 60. If the market is to remain bearish in the short-term, the GBP/USD should hold under 1.6225 and the RSI should stay under 60, or come right back below 60 if there is a brief violation. In this bearish continuation scenario, the next key support will be the rising trendline seen in the 4H, daily charts. Bearish price action can meet this around 1.61.
Bullish scenario: Otherwise, a break above 1.6230 for example puts the focus back to the 1.63 handle, especially if the 1H RSI also pushed to 70. In this case, there could still be some more consolidation, but price action is likely choppy and more or less sideways. In the 4H chart, note the RSI holding above 40, showing bullish momentum in this time-frame is maintained. If this RSI pushes above 60, the GBP/USD is likely in the process of bullish continuation.
GBP/USD 4HChart 9/27 /2012 8:23AM EDT
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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