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Forex Strategy: GBP/USD May Dip As Bulls Hit Brick Wall Near 1.6600

Forex Strategy: GBP/USD May Dip As Bulls Hit Brick Wall Near 1.6600

2014-03-27 11:49:00
David de Ferranti, Currency Analyst

Talking Points

  • GBP/USD Technical Strategy: Sidelines preferred
  • Former support-turned-resistance at 1.6600 may limit bounce
  • Dark Cloud Cover on weekly warns of larger correction

As noted in yesterday’s candlesticks report the Pound was likely to make a run at the key 1.6600 handle. Given that conviction was not strong enough amongst traders to force the currency to close above the critical resistance level, further gains may be limited. The appearance of a bearish reversal pattern would suggest a quick retracement back towards the 1.6455/60 mark.

GBP/USD: Bounce Encounters Brick Wall

Forex-Strategy-GBPUSD-May-Dip-As-Bulls-Hit-Brick-Wall-Near-1.6600_body_Picture_3.png, Forex Strategy: GBP/USD May Dip As Bulls Hit Brick Wall Near 1.6600

Daily Chart - Created Using FXCM Marketscope 2.0

Drilling down to the four hour chart; the Dojis in intraday trade denote deliberation amongst the bulls as the Pound trades shy of the key 1.6600 handle. A move back below resistance-turned-support at 1.6568 would likely open up a dip back to the 1.6460 mark.

GBP/USD: Bulls Lose Steam As Dojis Descend

Forex-Strategy-GBPUSD-May-Dip-As-Bulls-Hit-Brick-Wall-Near-1.6600_body_Picture_2.png, Forex Strategy: GBP/USD May Dip As Bulls Hit Brick Wall Near 1.6600

4 Hour Chart - Created Using FXCM Marketscope 2.0

The ominous Dark Cloud Cover formation on the weekly at multi-year resistance also remains on the radar, and is threatening a more significant correction ahead for the Pound. A potential target is offered by the 23.6% Fib Retracement Level near 1.6350.

GBP/USD Weekly Warns of Weakness

Forex-Strategy-GBPUSD-May-Dip-As-Bulls-Hit-Brick-Wall-Near-1.6600_body_Picture_1.png, Forex Strategy: GBP/USD May Dip As Bulls Hit Brick Wall Near 1.6600

Weekly Chart - Created Using FXCM Marketscope 2.0

Key Fundamental Event Risk Ahead: Note that upcoming UK economic data may cause price action that negates the technical bias offered above.

By David de Ferranti, Market Analyst, FXCM

Follow David on Twitter: @Davidde

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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