• Daily and 4H: The GBP/USD is eyeing the 1.57 level. Before that, the 1.59 was a short-term swing target and was anticipated to have provide some support. The market has reached past that, but is supported now at 1.58. (Refer to Weekly Technical Update 1.29.2010). The 1.57 level is the next target.
• The decline so far has completed an ABCD retracement pattern, and we are already seeing support and some reversal action to start the US session. You can see that more clearly in the 1H time-frame. The bearish outlook is still valid, but in the near-term there seems to be a correction rally.
• 1H: The parabolic/price action/bullish divergence is a strong reversal signal. But this may just be a near-term correction. It may be prudent to layout the fibonacci retracement levels, and anticipate topping action starting with the 38.2% (1.5975), which is where the pair was to start the week. 50% is also viable and would be coincident to MA50.
• Parabolic might be a good way to re-establish short-term bearish outlook, but not if the market starts going into ranging action with sharp swings from support to resistance. (When the parabolic indicator switches back above the price, it may be used as a bearish continuation signal.)
• I believe short retracements are best for parabolic, as those tend to have quick continuations and that is the type of price action the parabolic tool works best for. Therefore, if the market starts to retrace further, I would instead look for topping action and a bearish signal from price action instead of the parabolic.
• A stronger retracement does not always lead to non-sharp continuations, but it does slightly weaken the outlook for T2(1.57), so more confirmation may be needed.

Fan Yang
Currency Analyst
Commodity Trading Advisor

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