Forex Technical Update
- The GBP/USD chart shows a market flattened after a rally in July that developed in the shape of a leading triangle.
- Currently we have added an A, B and now in the C wave of a "range-bound" market: in quotations because the range resistance has expanded, and the support is likely to expand as well with the most recent price action suggesting bearish continuation in the short-term.
- We can expand down towards 1.62, and if indeed we are in an expanded flat, we should find some support at this area.
- If however the market is not able to push back above 1.6260, we can have further correction down to 1.6140 (near 200SMA and 50% retracement).
- Until that is broken, the GBP/USD still has a bullish stance, and still can be considered developing an expanded flat.
- Note that the RSI is hovering above 40 maintaining the bullish momentum. If it dips below 40 but bounces right up and back above 60, we are likely done with correction and onto the bullish continuation scenario.
- The daily chart shows that the current bullish bias is only in the short term. In the longer medium term, we have been trading sideways for most of 2011. There is a slight bullish bias since the market was making some newer highs before coming back to support, but never really made lower lows.
- Still, the momentum is trapped as the RSI is stuck mainly between 40 and 60. A break above 60 helps to clear some of the bears from contesting the rally.
- Watch for the 4H and daily RSI push back above 60 to align momentum in the short and the long-medium term.
- A push back above 1.6460 should suggests a bullish continuation towards the 1.6546 pivot (78.6% retracement), and the 1.6745 2011-high.
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Fan Yang CMT
Chief Technical Strategist