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.
(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.
(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