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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; chart patterns in white; 50-period simple moving average in light blue.)
Price action on GBP/USD, a daily chart of which is shown, made a pronounced bounce late last week off key long-term support just below the important 1.4800 level. Beginning the current week, price has continued its bullishness off that bounce to revisit the key 1.5000 price region once again.
This bounce has established the potential for what may turn into a double-bottom reversal formation. Any strong breakout and daily close significantly above 1.5000 would lend further strength to the potential for this double-bottom formation.
This pattern, however, would not be confirmed unless a breakout above the double-bottom peak (1.5380) occurs. To the downside, any strong subsequent breakdown below 1.4780 would invalidate the double bottom, confirm a downtrend continuation, and could then potentially target key further support around 1.4500.
By James Chen, chief technical strategist, FXSolutions.com
