GBP/USD (daily chart as of August 22, 2013) found temporary support on August 14 at 1.5410/00, an important support level mentioned on our August 13 analysis. Price then broke above the 1.5570/5600 barrier as expected, with a strong bullish candlestick on August 15, and reached a high of 1.5715 on August 21, only 35 pips away from the June 17 high of 1.5750. Price is currently testing the 1.5580 support level.
The daily MACD is bullish but with a slowing MACD line, and the RSI is falling from just below 70. Note that the candlestick of August 21 is a doji with a long upper shadow, indicating relatively strong resistance at the session high of 1.5715. Technically, after an uptrend, if there is a doji followed by strong bearish candlestick(s) it would be a potential bearish signal, at least for the short term. So watch today’s and tomorrow’s closing prices closely.
Short-term trading strategies:
If price can hold the 1.5580 support level and invalidate the bearish doji signal, more upside momentum may be expected:
1st resistance: 1.5715 (August 21 high)
2nd resistance: 1.5750 (key resistance)
In the event of price breaking down 1.5580 and confirming the bearish doji signal, the pair could turn down and test the following support levels:
1st support: 1.5420 (August 14 low)
2nd support: 1.5300 (multiple highs)
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