GBP/USD Approaching 1.6600 Strong Resistance Level

GBP/USD (daily chart as of February 12, 2014) continues the upside momentum after a hawkish quarterly inflation report from the Bank of England, which raises expectations of a sooner than expected tightening monetary policy or interest rates hike. Note that the pair’s recent rebound started from February 4, right at the daily EMA 100 that served as strong support in November 2013 (arrow on chart).

The candlesticks of February 3 and 4 formed a “thrusting” or “in neck” pattern, shown on chart in pink rectangle, with the first bearish day in a downtrend followed by a bullish day that opened below the prior low and closed near but below the midpoint of the first real body. If the second bullish day closed above the midpoint of the first bearish day, we would have a “piercing” pattern, a stronger bullish reversal signal.

Price rises after the “thrusting” pattern, and is now approaching the strong resistance level around 1.6600, which is the January 2 high, and also close to the medium-term uptrend support (now resistance) line that extends back to July 2013. The pair needs to clear those strong barriers for more upside momentum, otherwise it could turn down to test the 4-hour EMA 200 again.

Support levels below:

1st support: 1.6515 (January 10 high)

2nd support: 4-hour EMA 200 or daily EMA 50

3rd support: daily EMA 100

Resistance levels above:

1st resistance: 1.6600 (January 2 high)

2nd resistance: 1.6665 (January 24 high)

3rd resistance: 1.6745 (April 2011 high)