By Russell Glaser – The Cable has bounced back from its low point at the height of the Greek fiscal crisis and the price is closing in on a significant resistance line that coincides with a Fibonacci retracement level. This may be a point for the pair to reverse and continue its long term bearish trend.
The daily chart below shows the long term bearish trend for the GBP/USD that began mid November. A downward sloping trend line takes into account all the price action for this move.
As the price moves higher, the price approaches the resistance level of 1.4800 (R1). This is the bottom price for the months of February and March. The price also is close to the 23.6% Fibonacci retracement level from the long term bearish trend.
The combination of the resistance line and the Fibonacci level makes this a significant price barrier. As such, we may expect the pair to bounce off of this price and resume the long term downward price movement.
The first price target is the late May highs at 1.4600 (S1).
The second price target is the swing low on the daily chart at 1.4230 (S2).
A protective stop (not shown) should be placed at the price level of 1.4915 to maintain a profit to risk ratio of roughly 2:1.
Forex Market Analysis provided by Forex Yard.
© 2006 by FxYard Ltd
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