After a sharp two week sell-off, the GBP/USD has reached and reacted from a key technical support area today.
As can be seen from the chart, the cable has reached its previous swing low and long-term bullish trend line around the 1.3710/15 area today.
At this stage, one has to treat this as just a technical bounce rather than a trend reversal. However, if we start to see the breakdown of resistance levels then that could confirm a reversal in the trend.
The first key resistance is seen at 1.3900, a former support level. We expect the potential re-test of this level to offer at least a short-term bounce.
However, if the cable refuses to go down and eventually climbs above the most recent high at just below 1.4000 then that would be game over for the bears.
Meanwhile, if support at 1.3710/15 area gives way first then we could see a potential drop to the next key support area between 1.3550 and 1.3650. This range was formerly a major resistance zone.
Below that range, the next technically-important level is at around 1.3430 – the point of origin of last year’s breakout.
Source: eSignal and FOREX.com.