GBP/USD (daily chart) has tentatively suspended its precipitous decline of last week just above the significant 1.5825 price region, last hit in mid-November 2012. The past week’s sustained drop broke down below both the key 1.6000 support level as well as a strong bullish support trend line that was respected at least six times since it was initiated at the June 2012 low just above 1.5250. This support breakdown can be considered a major price event for the pair, as it signaled at least a disruption of the previously prevailing bullish trend. Prior to the breakdown, the pair was unable to break out significantly above the 1.6300 resistance level, as price formed a fourth top with a shooting star candle right around 1.6300 in the very beginning of the year. This failure to break out to the upside resulted in the subsequent bearish stance. With potential resistance now at 1.6000 (prior support), in the event of a breakdown below the 1.5800-1.5825 price region, the pair could extend its downside correction towards further potential support around the 1.5600 price region.
James Chen, CMT
Chief Technical Strategist
FX Solutions
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