Forex Technical Update

Previous: GBP/USD Retreats Back Under 1.62; Swing Projection Targets 1.61 (9/28)

GBP/USD 1H Chart 10/1/ 2012 8:30AM EDT

GBP/USD 10/1/2012 1H chart

The GBP/USD almost got to the 1.61 level as we began another week of trading. Then there was a bullish divergence with the RSI in the 1H chart, and a rally followed. The rally was capped off at 1.6165 so far during the 10/1 European session. The rejection here holds a bearish bias. While there is a new RSI high, the corresponding price high was lower. This is called a negative reversal, and suggests another attempt to new lows, in this case to at least tag 1.61.

Bearish scenario: If the GBP/USD gets to 1.6065-1.6050 area, it will be testing a rising trendline that held bullish price action since August. A break below 1.6050, and then a clear below the 1.60 psychological handle is probably part of a strong downward correction with gravity toward the 200-day SMA, which is near 1.5780 at the moment. There will also be a rising trendline here from May.

Bullish scenario: If the GBP/USD starts the week holding above 1.61, and returning above 1.6170, the near-term target is 1.62, but the bullish outlook opens up 1.6265 in the short-term and then focuses on the 1.63 handle.

GBP/USD Daily Chart 10/1/2012 8:33AM EDT

GBP/USD 10/1/2012 Daily 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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