Forex Technical Update
The GBP/USD has been in a class topping action to be followed by a pullback and confirmation. After breaking below the base near 1.5870, the market ran down to 1.5687, pushing the RSI below 30, reflecting bearish momentum. Then from this pivot the market rallied back to test the 1.59 area as resistance. Note that the RSI shows maintenance of the bearish momentum as the reading failed to break above 60 in the 4H chart.
This also came to test the 200 period simple moving average in the 4H chart, and after a brief crack, we saw a sharp rejection. The fact there was a sharp rejection means even though the market cracked the 200SMA, we can still consider this a slingshot. In the early 11/21 US session, the market hovers above the 1.5612, 61.8% retracement level.
Note in the daily chart the strength of the bearish candle that represents the first global session. it continues to follow through a sling shot in this time-frame, as the market had respected the 200 day SMA after the October rally. The RSI also reflects continuance of bearish momentum, especially if it drops below 40 this week.
Below 1.56 psychological support, we open up 78.6% retracement at 1.5462, but also the lows tested earlier in September, which were also lows from August, September, and December of 2010 - near 1.5340. Considering this area provided support in the past year, it should be the limit for the current bearish outlook below 1.56, although the momentum, and price action hints at further downside.
Fan Yang CMT is the Chief Technical Strategist FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources