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(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, has broken down below the neckline of a rough head and shoulders pattern. This occurs after price previously broke down below a key uptrend support line extending from the March low.
The right shoulder of the current head and shoulders pattern reached up to just above the 1.6600 level before dropping below the 1.6265 horizontal neckline just yesterday. Further bearishness on this breakdown should meet further key support in the 1.6000 price region, followed by the 1.5800 region.
In the event of a failure of this bearish head and shoulders pattern, longer-term upside resistance continues to reside in the strong 1.6600 resistance region.
By James Chen, chief technical strategist, FX Solutions
