Bullish Retracement in GBP/USD Daily Chart
02/05/2009 10:10 am EST
(Price on 1st pane, Slow Stochastics on 2nd pane; horizontal support/resistance levels in yellow; downtrend lines in red; uptrend lines in green; chart patterns in magenta; 50-period simple moving average in light blue.)
Price action on the GBP/USD daily chart, as shown, is currently in the midst of a bullish retracement within the context of a general downtrend. This bullish retracement has been forming within the past two weeks after price hit a fresh 23-year low almost precisely at 1.3500 in late January. Clear triggers for potential trading opportunities include any breakdown below short-term uptrend support on the current bullish retracement.
In this event, price should meet further support in the 1.4050 level, a breakdown of which could target extreme support in the 1.3500 region, the noted 23-year low. Other significant events would be a pronounced bounce down off of the downtrend resistance line extending from the swing high on 10/30/2008, as well as any strong breakout above the same line. In the event of a breakout above that downtrend resistance line, further resistance to the upside resides in the 1.5250 region.
By James Chen, chief technical strategist, FX Solutions