GBP/USD Break Out OR Fake Out

• faithmight
• June 29th, 2010

Continued dollar weakness has rallied the $GBPUSD to as high as 1.5126 (then 1.5123, a near double top) on the daily chart.

Retracement during last night’s London session found support at 1.5010 which is a familiar level as the June 24, 2010 high of 1.5009 when cable finally broke above 1.5000 for the first time since falling below this level in May. While remaining above the 1.5000 major half point and psychological level is considered very bullish, I am hesitant to declare an all out breakout until we can see the WEEKLY chart retrace a bit.

Another red flag to pay attention to is the fact that this recent bullish wave has already retraced as indicated by the circled area above. After a rally has corrected, if it is indeed proper retracement, a higher high should be made on the charts after the retracement. We can clearly see that the highs after the retracement are significantly lower highs than the previous high at 1.5126. That means any move to the down side could result in a much deeper retracement and even a possible reversal. As such, a slide in price move below 1.5000 can be resonably expected. Keep an eye on the Fibobnacci levels as possible levels of support as well as the former high at 1.4971 if price manages to break below 1.5000.

I still maintain a bullish bias on the $GBPUSD currency pair. In fact, cable remains bullish as long as price can remain above 1.4750 which coincides with the 50% Fibonacci level on the weekly chart. As always, mind your timeframes and trade what you see, not what I think.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

Tickers: $USDX, GBP, GBPUSD

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