Forex Technical Update

Previous: GBP/USD Attacking the 1.63 2012-High (9/21)

GBP/USD 4H Chart 9/24 /2012 12:55PM EDT

GBP/USD 9/24/2012 4H chart

Bearish divergence: The GBP/USD just barely cracked 1.63 handle to establish a slightly higher 2012-high at 1.6309, before retraceing back below 1.62. It now sits around the 1.62 handle during the 9/24 US session. This is coming off a bearish divergence in the 4H chart, showing a flattening against the bullish momentum it had since the bull run started mid-July. Still, now that the “overbought” signal is resolved with the current retreat, the GBP/USD is at this make or break point for keeping the bullish bias as far as momentum is concerned.

Momentum tested: The 4H RSI is still above 40, which reflects maintenance of bullish momentum in this time-frame. It should be noted that in the 4H TF, the RSI reading has remained above 40 since picking up speed in early August. A break below 40, with price breaking below the 1.6150 pivot would show a loss of bullish momentum. This development would expose the next support pivot around 1.6065 as well as the rising trendline that’s been support through August’ bullish price action.

Near-term momentum: The 1H chart shows a market that has sideways momentum as the RSI swings from 30 to 70. But the near-term momentum is still bullish as the RSI has failed to break below 40. And if the 1H RSI reading rallies back above 60, with price breaking above the very short-term declining wedge, especially if it can clear above 1.6235 (central pivot), the focus remains to the upside.

The bottom line is that GBP/USD has a tough resistance at 1.63, which provided supply even after it cracked. However, unless it falls below 1.6165 and shows loss of momentum in the 1H and 4H time-frames, the bias is bullish to at best sideways.

GBP/USD 1H Chart 9/24 /2012 1:00PM EDT

GBP/USD 9/24/2012 1H chart

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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