GBP/USD is Likely in the Bearish Continuation Mode

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GBP/USD is Likely in the Bearish Continuation Mode

Bullish Correction Complete? The GBP/USD was bullish last week rallying from the 1.5875 low on the year to about 1.6180. This rally broke above the 100-, and 50-period SMAs in the 4H chart while pulling the RSI above 60, which shows loss of bearish bias and momentum. However, this week, GBP/USD respected the 200-period SMA, and has fallen below the 100- and 50-period SMAs while the RSI has fallen back below 40, which shows revival of bearish bias, and loss of any bullish momentum made last week.

GBP/USD 4H Chart 10/23
gbpusd 4h chart 10/23

(click to enlarge)

Bearish Continuation: The main thing form the 4H chart is that it continues to make lower highs and lower lows, so the bearish trend is still intact. With the technicals showing bearish bias, the GBP/USD is likely in a bearish continuation mode, with the 1.5875 low in sight, and with further downside risk due to the prevailing downtrend, and continuing USD-strength across the board.

GBP/USD Weekly Chart 10/23
gbpusd weekly chart 10/23

(click to enlarge)

Downside Risk: When we look at the weekly chart, we can see that the current decline might have might have further room to fall toward the 1.57-1.5750 area. This area involves a previous resistance and the 61.8% retracement level (at 1.5721). The RSI is around the oversold levels, so if price does dip in to this area, look for buyers.

Failure: Now, if after this next couple of weeks price fails to break into new lows, and starts to hold above 1.60, we should anticipate a bullish correction even before price reaches that 1.57-1.5750 area. If price can break above 1.6230 it would clear the October high and put in a price bottom, in which case we can expect a bullish correction attempt toward the 1.65 September high, where we should expect sellers.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.