Forex Technical Update
GBP/USD was trading at the range support area since last week, and so far has respected it as shown in the 4H chart above. It should be noted however that the market is trading under a declining 200 4H SMA, and the previous attempt toward range resistance was a failure. This suggests a bearish bias, though the market failed to confirm by breaking below the 1.5360 low from Dec 2011. Even below that there is an important support at 1.5310-1.5315 area.
So bears are weak, now what about bulls rallying from this support area? The 1H chart shows a market at the crossroad as it rallies in a flag pattern. The resistance at 1.5500 was key as it is a confluence of a declining trendline, 200 hour SMA, and just a tad higher than 38.2% retracement at 1.5487. The RSI cracked 60, but we can say it is still respecting it, keeping bearish momentum intact. If the RSI falls below 40, and price falls below 1.5445 and the flag pattern, the market shows weak bulls (especially with other USD-crosses like EUR/USD, AUD/USD rallying sharply). If these two also turn bearish later in the US session, and the GBP/USD is held below the 1.55 level, we are likely to see it continue the decline to retest the 1.5360-1.5375 low.
Fan Yang CMT is the Chief Technical Strategist FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources