GBP/USD (daily chart as of January 6, 2014) overshot key resistance at 1.6465 on December 27 and touched a new high of 1.6577, but closed lower right above 1.6465. Price then climbed for two more trading sessions and reached a fresh high of 1.6600 yesterday before it retreated back again below 1.6465.
The candlesticks of December 31 and January 2 (gray rectangle shape on chart) were a potential bearish engulfing pattern, with the second real body engulfing the entire real body of the first candlestick. That signal became more significant as it occurred right below the monthly EMA 200, which is currently located at 1.6620.
The bearish candlestick yesterday strengthened the warning signal, and today price traded below the daily EMA 20 for the second time since November 13, 2013, but managed to recover some of its losses and formed a potential Doji as of this writing. It appears that the currency pair is testing the significance of the EMA 20 support. If it fails to hold the daily EMA 20, further downmoves may be expected ahead.
Support levels below:
1st support: daily EMA 20
2nd support: 1.6260 or daily EMA 50
3rd support: 1.6120 (multiple highs and lows) or daily EMA 100
1st support: daily EMA 20
2nd support: 1.6260 or daily EMA 50
3rd support: 1.6120 (multiple highs and lows) or daily EMA 100
Resistance levels above:
1st resistance: 1.6465 (key resistance level)
2nd resistance: 1.6600 (January 2 high)
3rd resistance: monthly EMA 200
1st resistance: 1.6465 (key resistance level)
2nd resistance: 1.6600 (January 2 high)
3rd resistance: monthly EMA 200
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