GBP/USD (daily chart) as of Friday (6/10/2011) has dropped substantially to approach a confluence of key support factors, including the 1.6200 support price region, the 38.2% Fibonacci retracement of the last major bullish trend run, and an important long-term uptrend support line extending back to the May 2010 lows. Price action is therefore at a critical juncture once again. In the event of a significant breakdown below the current support confluence, which would jeopardize the longstanding bullish trend for GBP/USD, a key initial downside support target resides around the psychologically-important support/resistance level at 1.6000.
(Please click on the chart to enlarge. Chart key: price on 1st pane, Stochastics on 2nd pane; horizontal support/resistance levels in black; uptrend lines in green; downtrend lines in red; 50-period simple moving average in orange; 100-period simple moving average in brown; 200-period simple moving average in dark blue; Fibonacci levels in magenta and purple.)
James Chen, CTA, CMT
Director of Technical Research and Education