GBP/USD consolidates declines within continuing bearish trend
James Chen November 24, 2014 5:36 PM
<p>GBP/USD (daily chart shown below) has consolidated its recent declines in the form of a bearish flag pattern. This consolidation has formed within a strong […]</p>
GBP/USD (daily chart shown below) has consolidated its recent declines in the form of a bearish flag pattern. This consolidation has formed within a strong and continuing bearish trend that has been in place for more than four months since the 1.7190 multi-year high in mid-July.
The sharp drop since July, which represents more than a 9% decline down to last week’s 1.5588 one-year low, has consistently traded underneath a well-defined downtrend resistance line as well the 50-day moving average.
During the course of this downtrend, GBP/USD has been trading under strong and continuous pressure in line with substantial US dollar strength within the past several months. Occasional pullback rallies have failed thus far in providing any significant respite or recovery for the embattled currency pair.
The current consolidation appears to be poised for further downside pressure to conform with the prevailing bearish trend. The noted bear flag pattern could provide an impetus for a continuation of the downtrend towards further lows.
With near-term upside resistance around the 1.5750 level, any breakdown below the bear flag pattern and the noted 1.5588 low would confirm a continuation of the entrenched downtrend, with further downside targets residing around 1.5400 and then 1.5250.