GBP/USD (daily chart) as of Monday (9/19/2011) has continued its dramatic overall bearishness of the last several weeks by making a significant breakdown below key 1.5750 area support. This breakdown caps off a full month of steeply bearish price action coming off the mid-August 1.6616 high. Now that a breakdown below the 1.5750 support region has been made, the next major support target to the downside resides around the 1.5500 price region, which represents the 50% retracement of the long-term previous uptrend running from the May 2010 1.4230 low to the April 2011 1.6745 high. The trend on GBP/USD is now bearish, and further downside should be seen. Within the context of this new bearish trend, upside resistance resides around the key 1.6000 psychological price region.
(Click on chart to enlarge. Forex chart key: price on 1st pane, Stochastics 14,3,3 on 2nd pane; horizontal support/resistance levels in black; uptrend lines in green; downtrend lines in red; 50-period simple moving average (SMA) in orange; 100-period SMA in brown; 200-period SMA in dark blue; Fibonacci levels in magenta.)
James Chen, CTA, CMT
Director of Technical Research and Education