GBP/USD (daily chart) has made a tentative retreat after making significant gains for the past week and a half. This tentative bearish turn occurs after price climbed up to hit a key resistance confluence at both the 50-day moving average and the downtrend resistance line extending back to the September 1.6300 region high. A week and a half prior to this, price turned to the upside after dropping down to a support confluence that consisted of both the 200-day moving average and the key uptrend support line extending back to the June 1.5265 area low. GBP/USD can therefore be seen as moving within the confines of a 2-month bearish correction of a 6-month bullish trend. In the event that price continues its downside turn off the noted resistance confluence, an important potential support level to watch is 1.5900, as it is both a key prior support/resistance level as well as in the current vicinity of the 6-month bullish support trend line. Any breakdown below that level could move towards 1.5750. To the upside, on any breakout above the noted resistance confluence, the next major resistance level to the upside potentially resides around the 1.6150 level.
James Chen, CMT
Chief Technical Strategist
FX Solutions
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