May 14, 2013 – GBP/USD (daily chart) has shown clear signs of leaning towards a resumption of the strong bearish trend that has been in place since the beginning of the year. The current bearish resumption occurs after a substantial bullish correction that brought price up from the 1.4830 long-term low in mid-March up to the 1.5600-area major resistance high in early May, which was right at the 50% Fibonacci retracement of the steep January-March plunge. After turning down from that 50% correction high just last week, price has fallen dramatically, breaking down below both the key 1.5400 level as well as an important uptrend support line extending back to the noted mid-March low.
Currently, price has fallen quickly towards key support around 1.5250, which is also around the area of the 50-day moving average. A breakdown below this strong support level would provide further indication of a bearish trend resumption, with major downside objectives around 1.5000 and then a potential re-test of the long-term 1.4800-area low. Strong upside resistance now resides around the broken 1.5400 level.
James Chen, CMT
Chief Technical Strategist
City Index Group
Forex trading involves a substantial risk of loss and is not suitable for all investors. This information is being provided only for general market commentary and does not constitute investment trading advice. These materials are not intended as an offer or solicitation with respect to the purchase or sale of any financial instrument and should not be used as the basis for any investment decision.
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