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TECHNICAL UPDATE (IV): GBP/USD – Failure above 1.63…Is sub-1.60 next?

Updated Jan 4, 2013 5:00:00 PM By Chris Tevere, CMT

In the first trading day of 2013 GBP/USD broke above its highs from the previous year near 1.6310, however shortly after reaching 1.6350/55 (1:1 equidistant measured move whereby wave-5 is the same length as wave-1) Sterling began to unravel. The fact that it closed all the way back at the original opening level on Wednesday, combined with a daily RSI bearish divergence, suggested a potential market reversal could be underway – Highlighted on Twitter Wednesday. Additionally, with GBP/USD making a slightly higher high it satisfied the 5-wave Elliot sequence higher. Based upon Elliot Wave analysis, we should now be looking for a 3-wave pullback – Ideally towards the 38.2% retracement near 1.5955/60 or the previous wave-4 low around 1.5930/35.

Other notable levels of technical significance:

  • 1.6050/60 – 55 & 100-day sma’s
  • 1.5990/00 – Trendline support & bottom of daily Ichimoku Cloud
  • 1.5955/75 – 100-week sma, daily 144 & 169 EMA’s
  • 1.5925/35 – November low, 50% retracement &  top of weekly Ichimoku Cloud
  • 1.5900/05 – 200-day sma

Should GBP/USD begin to carve out a more meaningful bottom, it could prove wise to look to daily RSI for potential a confirmation (preferably finding support into the key 40/45 area).

Chart Source: Forex Charts by eSignal

TECHNICAL UPDATE (III): GBP/USD – Testing 2012 highs…
Updated Dec 20, 2012 5:10:00 PM

Sterling has continued to grind higher over the past few weeks – Initially taking out the key 1.6055/75 zone (see prior updates), followed by the 1.6125/75 area (61.8% retracement and previous 10/17 & 11/1 highs). Once breached, we saw nearly a straight line higher to test the noted 2012 highs around 1.6300/10. While GBP/USD presently remains below this these highs, we believe a further continuation could be likely over the coming sessions – Especially with daily RSI looking comfortable above the key 60/65 level.

Next potential targets/levels of resistance above 2012 highs:

  • 1.6350/55 – Wave 5 is equal to wave 1
  • 1.6425/30 – 78.6% retracement (drawn from April 2011 high & Jan. 2012 low)
  • 1.6460/70 – Trendline resistance from 2009 high

That said, if GBP/USD were to stop and reverse back lower from present levels, it would technically satisfy the Elliot Wave 5th push higher. Furthermore, it could even be classified as a potential longer-term double and/or triple top formation.

Chart Source: Forex Charts by eSignal

TECHNICAL UPDATE (II): GBP/USD – Break higher or just a head fake?
Updated Dec 3, 2012 3:40:00 PM

After consolidating for about a week, GBP/USD finally saw the bulls take control as it broke above the key 1.6055/75 zone: trendline resistance (drawn from the Sept. 2012 high), the 55-day sma as well as the top of the daily Ichimoku Cloud. This was predicated based upon the bullish Elliot Wave count (currently in wave-5 up) as well as daily RSI’s break above trendline resistance far in advance to price.

That being said, there’s a few key technical hurdles that Sterling still needs to overcome before we can feel more confident in the recent move higher:

  • 61.8% retracement near 1.6125/30
  • Prior highs between 1.6170/80
  • Daily RSI to break above the key 60/65 level

Should this occur over the ensuing sessions, then GBP/USD may see a test of the 2012 high around 1.6300/10 initially and potentially even 1.6425/30 thereafter – 78.6% retracement (using the April 2011 high & January 2012 low).

Chart Source: Forex Charts by eSignal

TECHNICAL UPDATE (I): GBP/USD – Torn between bulls & bears
Updated Nov 26, 2012 4:35:00 PM

Bullish case:

After testing briefly below the 200-day sma near 1.5845/50, GBPUSD has rebounded to break back above the noted 38.2% retracement as well as the daily 144 & 169 EMA’s. From an Elliot Wave perspective, the fact that the key 1.5765/85 level remains intact suggests this recent rally could be wave-5 up (blue), which could take Cable above 1.63 over the coming weeks. Additionally, with price above the 13-day sma (red), and this above the daily 144 & 169 EMA’s, it suggests a further recovery could be underway. Furthermore, daily RSI has broken above corresponding trendline resistance in advance to price.

Bearish case:

Daily RSI broke below the key 40 level earlier in November, which implies general weakness in GBP/USD’s uptrend. Additionally, RSI still remains below the 60/65 level which often proves resistive in downtrends. From a strictly price perspective, Cable found stiff resistance into the 61.8% retracement near 1.6045 (using the November high & low) on Friday and this came just ahead of the 55-day sma around 1.6060. Slightly above there Sterling sees the top of the daily Ichimoku Cloud (1.6080) and then trendline resistance, drawn from the 9/21 high, around 1.6090/95.

That said, while price remains between 1.5850 and 1.6100, a good course of action may be to stay on the sidelines while the bulls & bears battle it out.

Keep an eye on key data announcements out of the U.K. as they could influence the path of GBP/USD over the next few days:

  • 3Q Preliminary GDP – Consensus 1.0% (Tuesday)
  • November Nationwide House Prices – Expected -1.0% YoY (Thursday)
  • October Mortgage Approvals – Consensus 51.5k (Thursday)
  • November GfK Consumer Confidence – Expected -30 (Thursday night)

Chart Source: Forex Charts by eSignal

TECHNICAL UPDATE: GBP/USD – Approaching multiple key support levels…
Updated Nov 9, 2012 2:00:00 PM

Cable has continued to trade lower after forming a potential longer-term double top around 1.6300/10 in late-September, which was coincided by an RSI bearish divergence into these highs. Since then, I’ve continued to believe that Sterling has been a sell on rallies until it approaches the key 38.2% Fibonacci retracement (using the June low & September high) – Traditionally, technicians believe this level is the minimum retracement before a prior trend can resume. Furthermore, there have been multiple bearish candlestick formations (namely shooting stars & bearish engulfing patterns) which have marked multiple highs over the past few weeks.

That said, GBP/USD is approaching numerous key technical levels which could prove supportive over the coming days:

  • 1.5910/15 – 38.2% retracement
  • 1.5890/00 – Daily 144 & 169 EMA’s
  • 1.5890 – Bottom of both the daily & weekly Ichimoku Clouds
  • 1.5865 – 100-day sma
  • 1.5850 – 200-day sma
  • 1.5785/90 – 50% retracement
  • 1.5765/85 – Convergence of key highs & lows

It may prove beneficial to keep a watchful eye on daily RSI as it is currently testing the key 40 level (often this oscillators shows leading characteristics) – A daily close below this would suggest Cable is in a renewed downtrend and significant declines could be in the offing. A break below the noted 1.5765/85 zone would be a critical technical blow to GBP/USD bulls out there.

Chart Source: Forex Charts by eSignal

Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

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