GBP/USD (daily chart) as of Monday (10/03/2011) has resumed its strongly bearish bias within the context of a steep downtrend that has been in place for more than two months since the late August 1.6616 high. This downtrend established a low right around key support in the 1.5330 price region slightly more than a week ago, before making a significant bullish correction that approached 1.5750 resistance. This key 1.5750 resistance having held, price action turned back down in the direction of the prevailing trend late last week, and has continued the overall bearish bias on Monday, tentatively breaking below the key 1.5500 level once again. Currently, price appears poised to target the noted 1.5330 downside support once again, with a subsequent breakdown below that level continuing the steep downtrend and potentially targeting 1.5200 (which is the 61.8% Fibonacci retracement of the last major uptrend from the May 2010 1.4230 low to the April 2011 1.6745 high), and then the psychologically important 1.5000 level.
(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