Forex Technical Update

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GBP/USD 4H Chart 7/16/2012 2:30PM EDT

GBP/USD

The short squeeze today is pressuring the USD across the board, and the GBP/USD is trading up against a declining trendline connecting the 1.5780 high on 6/20 with the 1.5725 high on 7/2. The 4H chart shows the test of this trendline resistance as the market trades around 1.5650. Failure to break above 1.5650 through the upcoming 7/14 Asian session and a push back below 1.56 by the European session would maintain short-term bearish bias.

A hold above 1.5650 is likely to introduce some further upside risk to this pair this week. The daily chart shows a scenario toward 1.59-1.5910, a wave projection in confluence with 61.8% retracement of the 1.6305-1.5271 bear run during April and May 2012. This bullish scenario in the short-term is still within the context of a medium term bearish outlook.

IF this rally DOES materialize before Bernanke finishes his testimony in front of the US senate, consider a possible sell-the-news scenario because Bernanke tends to disappoint QE hopes. If the rally can continue and extend even beyond 1.5910 after Wednesday (7/18), then there is a chance this is more than just a squeeze, and we can expect upside risk toward 1.6150, or at least toward the declining trendline that goes back to April 2011.

GBP/USD Daily Chart 7/16/2012 2:35PM EDT

GBP/USD

Fan Yang CMT is a forex trader, analyst, educator and Chief Technical Strategist for FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.

Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analysis.