Forex Trading: GBP/USD Approaches Target And Backs Off

The GBP/USD approached the next target level at the 1.6672 level last night and backed off (high reached was 1.6661).  Reports of a central bank statement reaffirming the dollar as a reserve currency, led to the gains in the dollar and the fall of the GBP/USD.  The pair fell back below the 100 bar MA on the 5 minute chart at at the 1.6595 level.  Both the 100 and 200 bar MA on the chart is starting to slope lower.  This is bearish/gives GBP/USD a downward bias.

Yesterday the 1.6496 to 1.6500 level was a key level.  The price action fell below this support level earlier and scooted to a low of 1.6481.  The price rebounded quickly, however, and the market used this level as support on the 5 minute chart to move higher. This is a positive and has led to a further rebound in the pair to 1.6544.

Given the multi day gains, however, the market is due for a correction.  The 5 minute 100 bar moving average has given the sign to start the correction. The current level comes in at the 1.6583 and moving lower.  This moving average has to be the stop on the upside.  The close yesterday was 1.6584 which also makes the level important. There have also been a number of times the level was tested today  Clearly, the level is the key level on the topside today and with the price lower, the bias is to remain below.

The confirmation of further downside will occur if the price can move through the 1.6495 level and the low of the day at 1.6481.  From there a test of the 1.6427 level (38.2% retracement of the move down from the Nov 2007 high) will be the next progressive downside target. Follow the steps lower.

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