GBP/USD Tests Longer Term Resistance And Finds Profit Takers

The GBP/USD moved up to test the target resistance area as outlined in previous posts as dollar selling continued after the weekend. The target level corresponds with the 38.2% retracement of the move down from the high November 2007 of 2.1160 to the low in January 2008 of 1.3502. The 38.2% Fibonacci resistance level comes in a 1.6427.  The high for the day reached 1.6430, before backing off lower.  The correction off the high has reached 1.6349.  The chart above shows the derivation of the level.

The bias remains positive for the pair from a technical perspective. The price remains well above the 100 hour moving average at the 1.6020 currently.  The shorter term bias also remains positive (indicating buy on dips).

On the shorter term 5 minute chart which we like to look at for shorter term support, the 100 bar moving average comes in at the 1.6310 (and moving higher).  The mid point of the move up today also should provide some intraday support at the 1.6294 levels.

Although technical bias remains positive, the use of things like Fibonacci Retracements, Horizontal Resistance lines and Trendlines give the astute trader, the ability to sell/take profit against key resistance levels when bias is still positive. In this case the test of the longer term resistance level from the 38.2% retracement of the longer term downtrend offered that opportunity to trade the correction.  So although bias remains positive, it is sometimes appropriate to recognize key levels and take profit when the opportunity presents itself.

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