GBP/USD Nears Key Consolidation Level

03/01/2011 7:00 am EST

Focus: FOREX

James Chen

Chief Technical Strategist, FX Solutions

After month-long sideways trading, the GBP/USD pair is again testing upper limits. Does it have the strength to break out this time?

Price action on GBP/USD (a daily chart of which is shown) as of Monday (Feb. 28) has continued its rangebound consolidation, roughly trading between key support around 1.6000 and key resistance around 1.6300, a range that has been in place since the beginning of the month.

chart
Click to Enlarge

(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.)

Having made a significant bullish push today, price action has once again risen to attempt yet another re-test of the key 1.6300 resistance, which was established in early November and re-tested on several occasions since.

In the event of a breakout above 1.6300, which would be a significant bullish indication, a key upside resistance target resides around the 1.6500 price region. In the opposite event of a breakdown of the current consolidation below strong 1.6000 support, a key downside support target resides around the 1.5800 price region.

By James Chen, chief technical strategist, FXSolutions.com

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