Forex Technical Update

Previous: GBP/USD Challenging Bearish Momentum after Breakdown (10/5)

GBP/USD 4H Chart 9:00AM 10/8/2012

GBP/USD 10/8/2012 4H chart

Bearish momentum: The GBP/USD failed to break above a declining trendline last Friday (10/5) as seen in the 4H chart. After failing to hold above 1.62, cable fell sharply, from the channel resistance past the projected channel support. The 4H RSI reading also held under 60 and is now back to 30, a sign of persistent bearish momentum developing, although in the near-term in the 10/8 US session, it might be slightly oversold.

Downside risk: There is still more room to the downside before we meet any major support, specifically the 1.5780 level which is 50% retracement 200-day SMA, and a previous resistance area. Before that the 1.5911, 38.2% retracement and former resistance pivot can also be identified as a possible support .

Momentum cycle: Also look for support when the daily RSI approaches 40. A period of consolidation against the current decline could be starting then.

GBP/USD Daily Chart 9:05AM 10/8/2012

GBP/USD 10/8/2012 Daily Chart

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

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