GBP/USD drops to dip below key support

<p>GBP/USD (daily chart) has dropped to dip below major support around the 1.6500 price level, re-testing the sub-1.6500 lows hit in late March. In the […]</p>

GBP/USD (daily chart) has dropped to dip below major support around the 1.6500 price level, re-testing the sub-1.6500 lows hit in late March. In the process, the currency pair has hit a new five-month low and could very soon be on its way to hitting a six-month low.

After a slight rebound during the prior week, Tuesday’s price action saw a sharp drop that pushed GBP/USD below its August low of 1.6534, and then tentatively below the noted 1.6500 psychological support level.

This bearish momentum occurs within the context of a newly-established bearish trend that originates from the mid-July multi-year high of 1.7190. From that high, the currency pair has plunged below several major support levels, including 1.7000, 1.6700, and now 1.6500.

In the process, price action has declined well below both the 50-day and 200-day moving averages. The 50-day moving average is now pointing sharply to the downside and could soon be converging with the lower 200-day moving average.

If GBP/USD continues to trade below 1.6500, the next major downside target clearly resides around the 1.6300 level, which is not only a major support/resistance area, but is also around the 38% Fibonacci retracement of the one-year bullish trend from the July 2013 low around 1.4800 up to the noted multi-year high of 1.7190 in July of this year.

 

2014-09-03-GBPUSD

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.