GBPUSD breaks trendline support giving a potential bearish clue
The GBPUSD broke below trendline support yesterday and has been able to stay below the level today. The trendline has provided support on 4 separate occasions during GBPUSD’s move higher from the April 22nd low of 1.4396 to the high reached June 30th at 1.6743 (see chart above).
The trendline was broken at the 1.6435 level yesterday. Today the trendline comes in at around the 1.6460 level. Should momentum continue to the downside, the longer term target could extend down to 1.5846 initially. Note, however, that progression down, must overcome hurdles including the low floor that has contained the downside at the 1.6187 to 1.6200 level (see daily chart above). That level has been a rock. In fact the low close since June 15th has been 1.6317 suggesting good support at any level in the 1.6200 region.
On the hourly chart, the pair broke below the 200 hour moving average at the 1.6452 level. Note the 200 hour moving averages is going sideways . The 100 hour MA is bending to the downside, which is a bearish development. If the market is able to maintain below these levels, currently at the 1.6447 and 1.6465 levels respectively, the downside momentum has the chance to develop.
When markets consolidate for an extended time period the chance of a break up or down starts to increase. The good news is the consolidation period gives price and technical clues (like the moving averages, the lows/highs, etc). The bad news is a series of hurdles develop which can tend to frustrate the moves. It is like getting through a locked door only to find another locked door (and another, and another). the 1.6200 level is like Fort Knox. On the topside the 1.6600 is like the Federal Reserves Gold Vaults. Both areas are well protected by the market.
Eventually, a break is made. We will hopefully be looking for the break in the coming days. Look for the clues to get through the doors.
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