GBP/USD Testing Major Forex Support Zone (April 7, 2014)

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GBP/USD Testing Major Forex Support Zone - April 7, 2014

GBP/USD Testing Major Forex Support Zone - April 7, 2014

On its 4-hour time frame, it can be seen that GBP/USD is testing a major forex support zone. This is the rising trend line connecting the pair’s recent lows and the 1.6600 major psychological support level. In addition, the Ichimoku Kinko Hyo indicator suggests a potential bounce off the second resistance level.

As you can see, price is testing a confluence of support zones on the 4-hour chart. However, other components of the Ichimoku Kinko Hyo indicator seem to suggest the end of the recent uptrend. For one, the green line already crossed below the price of GBP/USD and indicated a sell signal from the forex support area. Aside from that, price fell below the blue moving average, which means that a downtrend could be in play. The red line is also pointing downwards, reflecting trending market behavior.

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GBP/USD Forex Support Zone to Attract Buyers

A break below these support zones marked on the chart would indicate that the uptrend is indeed over. GBP/USD is already testing the line in the sand, which is already the second support level indicated by the orange lines.

There have been no major reports released from the UK recently, but traders are starting to establish more short positions after the UK economy printed a set of bleak PMI readings last week. Recall that the manufacturing, construction, and services sectors all printed PMI readings that were below expectations.

This suggests that a slowdown in growth could be expected in the near term, as PMI readings are typically leading indicators for production and hiring. Further declines could eventually lead to a lower GDP reading for the previous and current quarters. What’s keeping the pound afloat around forex support areas against its major counterparts though is remarks of a BOE rate hike coming from Governor Carney, who said that rates might increase before the general elections in the country.

To contact the reporter of the story: Marco Roemer at marco@forexminute.com

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