Forex Technical Update
GBP/USD 1H Chart 5/7/2012 7:10AM EDT
5/7 - The UK is observing May Day, a bank holiday. The price action seen in the GBP/USD is a pullback against last week's decline that went from 1.63 down to 1.6120 (near 38.2% retracement of the Apr 14-30 upswing from 1.5826 to 1.6305. Note that during the dip, the 1H RSI reading has been held under 60 while tagging 30. This is a sign of persistent bearish momentum. As we gear up for the 5/7 US trading session.
As the market pulls back, the GBP/USD is now trading near the bottom of the consolidation established during May2 -May 4. If the 1H RSI reading pushes above 60, and price action pushes above the declining trendline, we can shelve the bearish outlook and consider a sideways market. A break above 1.62 will clear the trendline and the 200-hour simple moving average. The bullish outlook is limited to about 1.6280 when it will meet a declining trendline seen in the daily chart, OR 1.63, the 4/30 high.
GBP/USD daily chart 5/7
The daily chart shows that the market is coming off a 5-session decline that followed a 10-session rally. If the market does continue to extend lower, the next pivot to monitor is 1.6070 (1.6068 is 50% retracement). Below that a key support resides around 60, around the rising trendline that goes back to the Jan. low of 1.5240.
The decline in the GBP/USD is considered a correction to a bullish market, unless there is a break below the 1.60 and support clusters around it. Also, if the daily RSI pushes below 40, the bullish momentum would be lost.
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.
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