Inverted Flag Pattern on GBP/USD Daily Chart
05/26/2010 12:01 am EST
Price action on GBP/USD, a daily chart of which is shown, has consolidated in a flag-like (inverted) pattern after a period of steep bearishness within the past several weeks.
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(Price on first pane, Slow Stochastics on second 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.)
This occurs within the context of an overall downtrend for the pair. The upper bounds of the inverted flag consolidation reside around the key 1.4500 resistance price region, while the lower bounds of the flag reside around the 1.4230 support price region.
In the event of a breakdown below the flag, which would confirm the formation as a trend continuation pattern, a key support target immediately to the downside resides in the 1.4100 price region. Further to the downside, in the event of continued downtrend bearishness, a longer-term support target resides in the 1.3700 price region.
By James Chen, chief technical strategist, FXSolutions.com