GBP/USD 1H chart 1/24/2013 7:30AM EST
Consolidation: GBP/USD has been in a consolidation range this week as you can see in the 1H chart. The range is roughly between 1.5893 and 1.5804. While this week’s price action is directionless, there is a slight bearish bias in the short-term as the trend is to the downside entering this week. You can tell by the way the moving averages were aligned before some of them started to converge, yet the 200-hour SMA is still above price action. The RSI has tagged 30, but failed to clear above 60, and a return below 40 would be a sign of bearish continuation.
Breakout: Not to make a prediction, but a trend-following trader would prefer a breakout to the downside in this case. A clear break would be a slide below 1.58. Taking the width of the range as a projection guide, the breakout target to the downside would be to about 1.5715. A break above 1.5893 could lead to some short-term bullish outlook as well, however, a trend follower would either not take that trade, or take it with smaller position than the break to the downside. We did recently break below a key rising trendline, so a break to the upside could be just a pullback to test that trendline as resistance. A break above 1.60 with the 1H RSI above 70 will be needed to bring in further bullish outlook.
Fan Yang CMT is a forex trader, analyst, educator and Chief Technical Strategist for FXTimes – provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analysis.