May 14, 2013 – GBP/USD (daily chart) has shown clear signs of leaning towards a resumption of the strong bearish trend that has been in place since the beginning of the year. The current bearish resumption occurs after a substantial bullish correction that brought price up from the 1.4830 long-term low in mid-March up to the 1.5600-area major resistance high in early May, which was right at the 50% Fibonacci retracement of the steep January-March plunge. After turning down from that 50% correction high just last week, price has fallen dramatically, breaking down below both the key 1.5400 level as well as an important uptrend support line extending back to the noted mid-March low.
Currently, price has fallen quickly towards key support around 1.5250, which is also around the area of the 50-day moving average. A breakdown below this strong support level would provide further indication of a bearish trend resumption, with major downside objectives around 1.5000 and then a potential re-test of the long-term 1.4800-area low. Strong upside resistance now resides around the broken 1.5400 level.
James Chen, CMT
Chief Technical Strategist
City Index Group
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