GBP/USD Starts the Week with a Bearish Gap

0
107
GBP/USD Starts the Week with a Bearish Gap

Brief Consolidation and Breakdown:
The GBP/USD ended last week with a low of 1.6280 and consolidated after a poor NFP reading of 142K. However, the loss of US-strength was minor and brief, with a high at 1.6340 after the NFP-reaction. As we begin a new trading week, the GBP/USD dipped below 1.6280 down to 1.6164 with a gap.

Filling the Gap:
Now, the 1H chart looks oversold as the RSI tagged 20, and a near-term rally to close the gap is possible. Then we should expect sellers in the 1.6280-1.63 area. At this point, a break above 1.6350 might be needed to open up any meaningful consolidation outlook.

GBP/USD 1H Chart 9/8
gbpusd 1h chart 9/8

(click to enlarge)

The 1H chart is very bearish:
1) The 200-, 100-, and 50-hour simple moving averages are in bearish alignment, sloping down, and area spreading apart with price below all of them. This shows a bearish trend in full-throttle.
2) The RSI has tagged below 30 and even below 20, and also stayed below 60, even 50. This shows not only persistent but strong bearish momentum.

Bearish Continuation vs. Consolidation:
The above are reasons to anticipate sellers on any intra-session rally. As noted before a break back above 1.6350 will be needed to shift the bearish outlook to a possibly sideways one, though it would still bear some downside bias at first, until we get a clear price bottom.

Support for the Current Decline:
Now, take a look at the weekly chart. Last week was one of the strongest bearish weeks in a while, and is extending a sharp downtrend toward at least the 1.60 area. Note that the 200-week SMA resides around 1.60. Note that 50% retracement of the 2013-2014 rally is around 1.60. We should probably not expect any significant buying until this psychologically sticky price.

GBP/USD Weekly Chart
gbpusd 9/8 weekly chart

(click to enlarge)

A more aggressive bearish outlook for 2014 will be the 1.5854 support pivot from Nov. 2013, down tot he 1.5722, 61.8% retracement level. We should probably expect price to consolidate around 1.60 after the current bearish swing. since July.

Previous Post by Author: Gold Trading in a Falling Channel

SHARE
Previous articleGold Trading in a Falling Channel
Next articleDaily FX Trading Review: US and Canadian Jobs Data Disappoint – Sept 8, 2014
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.