GBP/USD Pulls Back Above 1.5955

GBP/USD (daily chart as of November 13, 2013) touched a low of 1.5853 yesterday, 40 pips below the October 16 low of 1.5893, but managed to close higher at 1.5903. Today price tentatively traded above the key 1.5955 level, which was the September 24 low and also the last significant low point within the prior uptrend. It appears that the currency pair is making a correction to the uptrend, or is in the midst of a potential short-term topping out.

Price needs to hold the 1.5890-1.5955 support zone, and break out above the short-term downtrend resistance line (bold red line on chart, connecting the October 25 high and the November 8 high) for another possible leg up move to test 1.6260 again. If price breaks down below the support zone with follow-through price action and is capped by 1.5890/5955, it would validate a potential double top (1.6260) pattern with the neckline located around 1.5890.

Support levels below:

1st support: 1.5890 (key support level)

2nd support: 1.5750 (June 17 high)

3rd support: daily EMA 200

Resistance levels above:

1st resistance: short-term downtrend line

2nd resistance: 1.6120 (multiple highs/lows)

3rd resistance: 1.6250/60 (key resistance level)