GBP/USD Finds Support at 4-Hour EMA 200

GBP/USD (4-hour chart as of January 30, 2014) fell sharply during the post-Fed trading session but found temporary support at 1.6440. The FOMC announced yesterday that they will cut monthly bond purchases by $10 billion to $65 billion, and another $10 billion to $55 billion in the upcoming February meeting. Mixed data from the UK also contributed to the downside movement. Current price is bouncing off the low of 1.6440 to test 1.6515, which is the January 10 high.

As shown on the 4-hour chart, the pair stalled right at the EMA 200, which has been serving as strong support since mid-December 2013 (arrow 1 to arrow 5 on chart). Take a closer look at how price acted against the EMA 200, shown on the chart with pink rectangles. Note that arrow 4 was a false breakdown of the EMA 200. Price then rose and broke above the EMA 200 again with a very strong bullish candlestick.

Current price is under pressure below a short-term downtrend line connecting the highs since January 24 (Downtrend Line 3 on chart). Watch closely the price action between that downtrend line and the 4-hour EMA 200. If the currency pair can hold the EMA 200 as it did before, it could rise to test the short-term downtrend line after clearing the 1.6515 handle. If it breaks down below the EMA 200 with confirmation, further downside movement should be expected.

Support levels below:
1st support: 4-hour EMA 200
2nd support: 1.6300 (January 17 low)
3rd support: 1.6210 (December 17, 2013 low)

Resistance levels above:
1st resistance: 1.6515 (January 10 high)
2nd resistance: Downtrend Line 3 on chart
3rd resistance: 1.6600 (January 2 high)