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GBP/USD Chart 4H 6/21/2012 1:53PM EDT

The resistance cluster just under 1.58 has capped GBP/USD rally this week, and the market is trading it back to new lows for the week.

The 4H chart shows that the pair is about to test June’s channel support near 1.56, which is also a previous resistance pivot. Also note that the RSI reading here is at 40. A break below it suggests loss of the bullish momentum established in June. and with price below 1.56, this in term opens up the possibility of a bearish outlook toward 1.5450, then the 1.5280-1.53 June lows.

Although price action and 4H momentum has not shown a bearish signal just yet, the 1H chart shows that bearish momentum is already building. IF we get a rally that fails to push back above 1.57, we are likely to continue developing the nascent bearish momentum into a stronger signal to the downside.

Also, if the RSI fails to push back above 60 and falls back below 40, we would also add weight to the bearish oultook.

GBP/USD Chart 1H 6/21/2012 1:57PM EDT

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.