January 10, 2014 – GBP/USD (daily chart) has made a modest pullback since the beginning of 2014 after having hit a 2+ year high at 1.6602 on the first day of the year. That high was reached in the midst of an exceptionally strong and steep bullish trend extending back from the July 2013 low around the 1.4800 level. This bullish trend, which is currently still intact, represents a full 12% rise within six months.
Supporting this bullishness are both a key uptrend line extending back from the noted 1.4800-area low as well as two key moving averages – the 50-day and 200-day. Both averages are pointing unmistakably to the upside, with the 50-day well above the 200-day, a condition that has been in place since September 2013.
The technical outlook for GBP/USD continues to carry a bullish bias moving further into 2014, and could potentially continue to reach for higher highs. The near-term upside resistance target resides around the 1.6750 level, which would further extend the bullish trend, and then potentially on towards the 1.7000 resistance level. Key downside support tentatively resides around the well-tested 1.6300 price region. Any sustained breakdown below that support level could signal a deterioration of the current bullish trend.
James Chen, CMT
Chief Technical Strategist
City Index Group
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