GBP/USD Drops to Test 1.5100

The GBP/USD daily chart (as of 7/12/2013) has pulled back from the high of 1.5220 to test an uptrend line connecting the 3/12 low and the 5/29 low. The line is currently positioned at around 1.5110. A brief price penetration below that trend line occurred during early trading session today, and price reached a low at 1.5075. A trend line breach on 7/4 has brought price down to retest the 3/12 low. Yesterday, price overshot above that line with a relatively strong close right around the 38.2% Fib retracement level of the 1.4810 low to the 1.5750 high, but more follow-through price action would be needed for this high-beta pair to confirm any major price movements.

If price breaks above the uptrend line with confirmation, more upside moves may be expected. Resistance levels are located at 1.5220 (yesterday’s high), 1.5300 (around the 7/3 high and the 50% Fib retracement), and then 1.5400 (around the 61.8% Fib retracement and the 4/11 high). Therefore, both 1.5300 and 1.5400 are important levels to watch due to the confluence of technical signals as well as the key psychological levels. To the downside, if price cannot break above the trend line, it may first find support at around 1.5000, and then retest the low of 1.4800/30. Note that the daily RSI is bouncing off 30 and heading toward 50, and the MACD is about to make a golden cross from below zero.