Head and Shoulders or Upward Trend in GBP/USD

06/17/2009 12:01 am EST

Focus: FOREX

James Chen

Chief Technical Strategist, FX Solutions

Click to Enlarge
(Price on 1st pane, Slow Stochastics on 2nd pane; horizontal support/resistance levels in yellow; uptrend lines in green; downtrend lines in red; 50-period simple moving average in light blue.)

Price action on GBP/USD, a daily chart of which is shown, continues to traverse a steep parallel uptrend channel. This is despite coming down from a failed double-test high that reached up to around 1.6620, falling short of the previous 1.6660 high.

Currently, price has bounced up off of support around 1.6200. A continuation of the current steep uptrend would be confirmed on a breakout above the 1.6660 high, which is also a key, long-term resistance region. In the event of a major breakout of this nature, any continued bullishness in this pair could reach up further to target the psychologically important 1.7000 level.

To the downside, dynamic support continues to reside around the accelerated uptrend support line extending from the lows in late April.

By James Chen, Chief Technical Analyst, FX Solutions

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