Resistance Likely to Drive British Pound Lower

02/09/2011 9:50 am EST

Focus: FOREX

The British pound has been reaching significant resistance lines against a number of its primary currency rivals. A chance exists that the pound could see some downward retracement over the next several days as investors test the strength of these levels.

As an example, the GBP/CHF, shown on the chart below, has some revealing indicators regarding this development.

chart
Click to Enlarge

As you can see, the pair touched the long-term trend line at 1.5500 and quickly bounced off.

Now we are beginning to see the technical pressure building against any additional bullishness for this pair, symbolized by the technical oscillators on the lower portion of the chart.

The (slow) Stochastic shows a very fresh bearish cross, suggesting heavy sell pressure, and what appears to be an impending downward movement that could be sustained for the next few days or even weeks.

The MACD indicator also shows a bearish cross, but the upward movement of the oscillator seems to be giving off mixed signals. The wide divergence on this oscillator, however, does support the downward notion.

If correct, the GBP/CHF could see some bearishness over the next few days, with targets at 1.5200 and 1.4900.

By Greg Holden of ForexYard.com

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