GBP/USD Narrow Range Trading before GDP

GBP/USD (daily chart as of April 28, 2014) has been unable to clear 1.6820 for more than two weeks since April 9 (red arrow on chart). A narrow range of 1.6760-1.6820 has been established over the course of the past nine trading sessions (red shadow), right above the support/resistance zone mentioned in our previous analysis.

This narrow trading range suggests increased resistance at 1.6820. The longer the trading range is in effect, the stronger the breakout move could be. Technically, a valid breakout should not return to its prior trading range. Note that uptrend line 2 is approaching the support/resistance zone now.

Price needs to clear 1.6820 to maintain upside momentum. Otherwise, it could face a potential decline to test the daily EMA 100 that has been serving as major long-term support since November 2013 (three green arrows on chart). Only a breach of the daily EMA 100 would change the longer-term view of the currency pair.

UK’s GDP growth will be released tomorrow. The prospects for strong economic growth and recent M&A news have boosted demand for sterling.

Support levels below:
1st support: 1.6650/70-1.6725 (multiple lows and highs)
2nd support: uptrend line 2 or daily EMA 100
3rd support: 1.6450 (March 23 low)

Resistance levels above:
1st resistance: 1.6820 (major resistance)
2nd resistance: 1.6880 (November 2009 high)
3rd resistance: 1.7040 (August 2009 high)