GBP/USD (daily chart) as of Thursday (9/22/2011) has continued its dramatic plummet since Wednesday, extending the sharp bearish trend that has been in place since the mid-August 1.6616 high. The current drop has brought price down to hit and dip under key support in the important 1.5350 price region. The steepness of this bearishness should soon prompt some corrective price action in the form of a pullback, but the overall directional bias continues to be to the downside in line with the strong existing downtrend. Upside resistance on this potential pullback resides around the key 1.5500 price region. Further bearish price action within the context of the current downtrend should target the 1.5200 price region (which is also the 61.8% Fibonacci retracement of the major May 2010 to May 2011 uptrend), followed by the psychologically-important 1.5000 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